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A conventional (low-ratio) mortgage is one where the down payment is 20% or more of the purchase price, so the loan-to-value ratio is 80% or below and mortgage default insurance generally isn’t required.
Not automatically. A conventional mortgage doesn’t require the borrower to buy default insurance, but the lender can still choose to insure the file itself — through portfolio (bulk) insurance — if the loan meets an insurer’s eligibility criteria, in which case it becomes an insurable mortgage instead of an uninsured one.
Because the borrower isn’t buying default insurance, none of the insured-mortgage rules — the purchase price cap, the 39%/44% GDS/TDS ceiling, the standard 25-year amortization limit — automatically apply. Each lender sets its own conventional-file qualifying rules within OSFI’s Guideline B-20 framework.
No insurance premium: since LTV is 80% or below, the borrower doesn’t pay a CMHC, Sagen, or Canada Guaranty default-insurance premium.
Lender sets its own ratios: GDS/TDS limits on conventional files are set by each lender under OSFI Guideline B-20, not the 39%/44% ceiling that applies to insured files.
Still may be insured behind the scenes: a lender can buy portfolio insurance on an eligible conventional mortgage for its own funding purposes, without the borrower paying a premium.
20% is also the rental-property floor: most non-owner-occupied rental purchases require at least 20% down regardless of price, the same threshold that defines a conventional mortgage on an owner-occupied home.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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