A borrower wants to purchase a $600,000 home with a 15% down payment. What type of mortgage will they need and what insurance is required?
Correct Answer
D) High-ratio mortgage with CMHC or private mortgage insurance
A 15% down payment on $600,000 is $90,000, leaving a $510,000 mortgage and an 85% loan-to-value ratio. A mortgage above 80% loan-to-value is a high-ratio mortgage, and a federally regulated lender must have it insured against default by CMHC or a private insurer such as Sagen or Canada Guaranty.
Why This Is the Correct Answer
With 15% down the loan-to-value ratio is 85%, above the 80% line, so this is a high-ratio mortgage that must carry mortgage default insurance from CMHC or a private insurer such as Sagen or Canada Guaranty.
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