In the realm of Canadian mortgage financing, the classifications among insured, insurable, and uninsurable mortgages offer crucial insights into borrowing opportunities and their associated terms and conditions.

Insured Mortgages

Insured mortgages in Canada are backed by mortgage default insurance provided by entities like Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada, or Canada Guaranty. These mortgages cater to borrowers seeking financing with down payments as low as 5%, spreading risk between the borrower and the insurer. To qualify for mortgage default insurance, the property's value must not exceed $1,000,000, the maximum allowable amortization period is 25 years, the property cannot be a rental property, and the transaction must be a purchase or renewal/transfer of your existing mortgage. You cannot refinance and get an insured mortgage.

Insurable Mortgages

Contrary to uninsured mortgages, insurable mortgages are fully insured, with the lender covering the insurance premium. Borrowers seeking insurable mortgages typically present down payments between 5% and 19.99%. These mortgages strictly adhere to insurer guidelines, including a maximum property value of $1,000,000 and a 25-year amortization period. Additionally, insurable mortgages must maintain an LTV ratio of 80% or less, the transaction cannot be a refinance and the property cannot be a rental property.

Insurable mortgages offer an attractive option for borrowers who can provide a substantial down payment, adhere to insurer guidelines, and fall within the specified LTV ratio. The full insurance coverage and adherence to guidelines provide lenders with added security, albeit at slightly higher interest rates compared to insured mortgages.

Uninsurable Mortgages

Uninsurable mortgages encompass scenarios that do not qualify for mortgage default insurance. These mortgages might include refinancing, properties exceeding specific value thresholds, or property types that don’t meet insurer guidelines. Borrowers seeking these mortgages face slightly higher interest rates due to the increased risk for lenders without the protection of insurance. They often require borrowers to present robust financial profiles.

Understanding the nuances among insured, insurable, and uninsurable mortgages enables borrowers to make informed decisions while considering the various terms and implications each category presents. Insurable mortgages, fully insured by the lender with strict adherence to insurer guidelines, offer a balanced option for borrowers seeking accessible financing within defined property value limits, amortization periods, and LTV ratios.