2nd Mortgage FAQ

In the previous section we discussed some things everybody should be well aware of when it comes to mortgages, lenders and your options on the home buyer’s market. Let us continue exploring the particulars of mortgage types and other terms that you need to be familiar with in order to safely navigate this often tricky field.

5. What is a conventional mortgage?

A conventional mortgage is a mortgage where the down payment no less than 20% of the purchase price. This is also often described as loan to value of less than 80%.

6. A High-Ratio Mortgage.

This is a mortgage where the borrowed amount exceeds 80% of the purchase price. Securing a high-ratio mortgage normally requires buying loan insurance provided by the CMHC, Genworth Financial or AIG United Guaranty, due to the high risk of it not being repaid.

The mortgage loan insurance is there to protect the lender in the event the mortgage is not repaid, and the lender has to foreclose the property. The obvious benefit to the borrower in this case is that this allows to purchase a home with less than 20% down payment. The insurance premium is paid by the borrower and can be added directly to the mortgage amount.

7. What Can Be Used for a Down Payment?

Registered Retirement Savings Plans can be used as a down payment. It is still not subject to income tax, but only if it is repaid within 15 years. Among other sources are:

  • Gifts Received from Immediate Family
  • Accumulated Savings and Equity
  • Funds Gained from the Sale of an Existing Property

8. Minimum Down Payment to Buy a Home.

A minimum down payment amount of 5% is normally required for the purchase of a property. There are some exceptions to this, however, such as when a specific lender agrees to offer mortgage loans with lower down payment criteria on “cash back” arrangements.  To qualify for this type of financing, a borrower’s credit history has to be clean and in perfect standing. 

There are still many more questions that we will be happy to answer in future articles, or you can give us a call and we will take care of the whole mortgage shopping process for you. Either way, Super Rates are here to make your experience easier and more efficient!