Higher home prices mean Canadians are looking for ways to make buying a home more budget friendly for them. You may likely have heard of high ratio and low ratio mortgages. As you also may have found out,  applying for a mortgage comes with options and the mortgage ratio can determine how much you are going to pay. 

What is a mortgage high ratio?
When applying for a loan from a lender for financing, you are expected to have a down payment. 
The overall price of the home you want to buy, your loan-to-value ratio is the difference between the size of your downpayment and the amount of money you want from a lender.
In Canada, a down payment is 20%. This means that 80% of the home is paid upfront by your mortgage lender and then becomes the mortgage principal that you will pay off with interest.

Since homes are very expensive right now and down payments are harder to save for, homebuyers can decide to put up a lower down payment than the 20%. When this happens, these are known as high ratio mortgages because the loan-to-value ratio is higher than the conventional 20%. The opposite of this also becomes true this is considered a low ratio mortgage, where the loan-to-value ratio is less than 80%.

Mortgage ratios are not to be confused with another important mortgage factor: debt ratios, which measure how much of your income goes towards servicing debt.
Of course, a low ratio mortgage is your best option if that's possible, but if it's not, here are some things to watch for if you are applying for a high ratio mortgage. 

Why do people choose a high ratio mortgage?

• You can get into the home owning market sooner
• Choosing a high ratio mortgage does not significantly impact your buying choices and mortgage terms
• High ratio mortgages actually tend to have lower interest rates than a low ratio mortgage

Some other things to consider are:

• All high ratio mortgages are required to have a mortgage default insurance from the Canada Mortgage and Housing Corporation (CMHC).
• One very important aspect of CMHC insurance is that it is only available for properties below $1 million
• If you need longer than a 25-year mortgage, you won't be able to get a high ratio mortgage

Although high ratio mortgages cost less upfront, you could find yourself paying higher regular mortgage payments. 

If you think a high ratio mortgage is a good option for you. be sure, you should consult a mortgage broker who can help you go through which is the best option for you.
If you are considering a move soon, let's talk about how much your home is currently worth. And if are looking for a home, I can help you too.