The Bank Act of Canada controls many facets of the finance industry, and the mortgage industry is not immune to its effect.
As a law, no chartered bank or is able to offer mortgage financing without insurance beyond a certain percentage of the value of the property. This limit used to be 75 percent, but was changed on April 20th, 2007 to 80 percent for most residential single-family mortgages.
A high ratio mortgage exceeds 80 percent of the property value, and must therefore be insured by CMHC, Genworth or AIG (the newest mortgage insurer in the industry). The price of the insurance premium IS added directly to the mortgage amount, going on TOP as an insurance premium vs. Continue reading “The term conventional mortgage refers to a mortgage that does not carry any form of high-ratio or lender insurance premium”