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The loan-to-value (LTV) ratio is the mortgage amount expressed as a percentage of the property’s purchase price or appraised value, whichever is lower. Canadian minimum down payment rules allow an LTV as high as 95% on the first $500,000 of price, tightening to 80% LTV (20% down) at $1.5 million and above.
LTV is the mirror image of the down payment: a larger down payment produces a lower LTV, and a smaller down payment produces a higher LTV. A mortgage with an LTV above 80% (down payment under 20%) is a high-ratio mortgage and must carry mortgage default insurance; at or below 80% LTV, a mortgage is conventional and does not require it.
LTV also drives the cost of that insurance — default-insurance premiums run roughly 0.60% to 4.00% of the loan amount, and the premium rate climbs as LTV climbs. Beyond insurance, lenders use LTV to set maximum loan amounts on refinances and HELOCs, and an appraiser’s valuation directly moves the LTV calculation if it comes in below the purchase price.
LTV = Mortgage amount ÷ Property value (lesser of purchase price or appraised value) × 100
80% is the dividing line: an LTV of 80% or less (20%+ down) is a conventional mortgage; above 80% LTV, the mortgage is high-ratio and must be insured by CMHC, Sagen, or Canada Guaranty.
Tiered by price: minimum down payment — and therefore maximum LTV — is set in bands: 5% down on the first $500,000, 10% on the portion from $500,000 to $1.5 million, and 20% at $1.5 million and above.
Drives insurance cost: default-insurance premiums run roughly 0.60% to 4.00% of the loan amount, rising as LTV rises.
Rechecked at refinance: lenders recalculate LTV using a fresh appraisal any time a property is refinanced, not just at purchase.
A buyer purchases a home for $600,000 with the minimum down payment:
$565,000 ÷ $600,000 = 94.17%. Because LTV exceeds 80%, this mortgage must be insured by CMHC, Sagen, or Canada Guaranty.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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