Conventional, Insurable & Uninsured Mortgages

In common Canadian residential mortgage usage, a conventional or low-ratio mortgage is generally one at 80% LTV or less—meaning the borrower has at least 20% equity in the purchase or property value used by the lender. That is a leverage classification.

It is not an insurance-status classification. A conventional mortgage may be insured through lender-paid/portfolio insurance, may have insurer-eligible characteristics without insurance currently in force, or may be completely uninsured. Treating “conventional” and “uninsured” as synonyms hides an important part of mortgage pricing and product design.

Once the mortgage is at or below 80% LTV, ask a second question: what is the insurance relationship? “Insured” means default insurance is actually in force. “Insurable” is industry shorthand for a mortgage that has characteristics that may qualify for mortgage insurance/funding treatment, even when the borrower is not paying a high-ratio premium. “Uninsured” means no mortgage default insurance covers the lender’s risk.

These labels affect the lender’s risk, capital and funding options. That can flow through into rate, product availability, amortization and qualification rules.

Four questions explain most of the classification: LTV, transaction purpose, amortization, and insurer/product eligibility. Property value/type and occupancy can also change the answer.

A 75% LTV owner-occupied purchase with a 25-year amortization may have insurable characteristics. The same borrower taking cash out through a refinance, extending to a longer amortization or financing a property outside insurer criteria can move into uninsured territory even at the same LTV.

Reaching 20% down usually removes the need for a borrower-paid high-ratio insurance premium on a standard purchase. It also reduces the mortgage amount. Those are meaningful benefits.

But a conventional mortgage can have a different rate than an insured mortgage, and some of the borrower’s cash is now locked into home equity. The decision should compare debt avoided, premium avoided, rate difference, payment, liquidity and future flexibility. “Avoid CMHC at all costs” is not a complete financial analysis.

A mortgage that meets insurer/funding criteria can be easier for certain lenders to fund or securitize than a mortgage that falls outside those criteria. That is one reason lenders sometimes price conventional mortgages differently depending on whether they are considered insurable or uninsured.

The borrower may never purchase transactional insurance and may never see an insurer name on the mortgage statement. Yet features such as purchase price, amortization, occupancy and transaction purpose can still influence the rate because they affect what the lender can do with the mortgage after funding.

Current public programs from Sagen and Canada Guaranty show an important distinction: for many purchase programs, a property can be below $1.5 million when LTV is above 80%, while the corresponding maximum is below $1 million when LTV is 80% or less. That means the 2024 increase in the high-ratio insured purchase ceiling to $1.5 million did not simply make every $1.0–$1.5 million conventional mortgage insurable.

This is insurer/product-specific rather than a universal definition of “conventional.” A $1.2 million purchase with 20% down can be a perfectly ordinary conventional mortgage while still being classified as uninsured under the lender’s available insurance/funding rules.

A standard refinance or equity take-out is commonly an uninsured conventional mortgage because it is outside the normal purchase-insurance framework. That can affect rate, amortization, lender choice and stress-test treatment.

However, current insurer programs create a defined exception for refinancing to build eligible secondary suites. CMHC Refinance can provide insured financing for qualifying projects. The right conclusion is therefore not “refinance can never be insured,” but “ordinary refinance is usually uninsured unless a specific insured refinance program applies.”

Conventional mortgages can sometimes be offered with amortizations longer than standard insured/insurable criteria, depending on lender policy. That can lower the payment, but it may move the mortgage into an uninsured pricing/funding bucket and slow principal repayment.

A borrower comparing 25 and 30 years at 20% down should therefore compare both amortization economics and classification effects. The longer option can lower the scheduled payment while increasing the rate or changing product eligibility.

For new uninsured mortgage originations at federally regulated institutions, OSFI’s current prescribed minimum qualifying rate remains the greater of the contract rate plus 2% or 5.25%. A lender can still apply its own prudent underwriting standards beyond that minimum.

A qualifying uninsured straight switch between federally regulated lenders at renewal is different: OSFI no longer expects the prescribed MQR to be applied when there is no increase in loan amount or amortization. The lender still underwrites the borrower and can apply its own risk criteria.

Because insurance reduces lender credit risk and can support funding, an insured or insurable mortgage can sometimes be priced below an uninsured mortgage. This can surprise borrowers who assume more equity must always produce the lowest rate.

More equity still reduces the loan amount and usually reduces household leverage. A rate comparison therefore has to be translated into dollars: premium, mortgage balance, interest, payment and cash retained. The lowest rate and the lowest total cost are not always the same outcome.

A $900,000 owner-occupied purchase with 10% down is normally high-ratio and transactionally insured if eligible. The same purchase with 20% down is conventional and may be insurable/insured through the lender or uninsured depending on the product. A $1.2 million purchase with 20% down is conventional, but current low-ratio insurer value limits can make it uninsured. A cash-out refinance at 65% LTV is conventional by leverage but commonly uninsured by purpose.

Those examples deliberately separate how much is borrowed from whether insurance is available or in force.

If the mortgage appears to fit insurer characteristics without a borrower-paid high-ratio premium, read Insurable Mortgages. If insurance is not available or not used, read Uninsured Mortgages. If your decision is primarily how much cash to put down, use Conventional Mortgage Down Payment.