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Mortgages with  less than 20% down payment!

 Finding the perfect home is no easy feat. And, in many cases, it’s the renovations after purchase that can make all the difference. 

A high ratio mortgage is a mortgage in which a borrower places a down payment of less than 20% of the purchase price on a home.

Another way of phrasing a high ratio mortgage is one with a loan to value ratio of more than 80%. A mortgage with more than a 20% down payment is called a conventional mortgage.high ratio mortgage will require mortgage insurance. Mortgage insurance is usually purchased by the lender through one of Canada’s three default insurers:

  • Canada Mortgage and Housing Corporation (CMHC)
  • Genworth Financial
  • Canada Guarantee

The cost of the premium is added on to the mortgage and amortized over the length of the mortgage. It can also be added to the closing costs, however this is not the norm.

A High Ratio Mortgage allows Canadians to purchase a house with as little as 5% down.High ratio mortgages are considered riskier for banks, because there is less immediate equity in the property, and in the event of default, it may be more difficult to recoup the loss in total. Therefore, the federal requirement of mortgage insurance became law.Because of mortgage insurance, a high ratio mortgage can still be obtained with a down payment as little as 5% of the purchase price. The ability to use mortgage insurance as a replacement for a higher down payment opens the housing market to a great many people.For instance, in the example above, a down payment of $50,000 would be required to qualify for a conventional mortgage on a $250,000 home. With a high ratio mortgage and the purchase of mortgage insurance, the down payment can be as little as $12,500. Not only does this open the housing market to many, it also allows a potential buyer to purchase a better quality home, provided the buyer qualifies for a mortgage otherwise.

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Buying your First Home in Canada?

The majority of Canadian households own their own home. According to Statistics Canada, a full 67.8% of Canada’s roughly 14.1 million households live in owner-occupied dwellings. For many recent immigrants, home ownership is a worthy goal, allowing families to literally and symbolically set down roots in Canada. Are you a newcomer to Canada? Here are some things you can do to start planning around buying your first home in Canada.

CREATING AN ACTION PLAN

When it comes to buying their first home in Canada, newcomers should focus on two key areas right from the outset:

  • Building Canadian credit history
  • Saving for a down payment

Additional steps in the home buying action plan include the following:

  • Researching communities
  • Assembling a real estate team

Steps 3 and 4 are less time sensitive than the first two steps, which should be prioritized upon arrival in Canada.

“The house you looked at today and wanted to think about until tomorrow may be the same house someone looked at yesterday and will buy today.“

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