What is a High Ratio Mortgage in Scarborough?
A High Ratio Mortgage is any home loan where the down payment is less than 20% of the purchase price. In Scarborough, this is extremely common for first-time buyers purchasing condos near the Town Centre or starter homes in West Hill.
The Catch: High ratio mortgages require mandatory CMHC mortgage default insurance (adding 2.8% - 4.0% to your loan) and are strictly limited to homes with a purchase price under $1,000,000.
What is a High Ratio Mortgage? Homeowners in Scarborough
Navigating the $1 Million Cap in a Hot Market
If you are looking at real estate in Scarborough today, you have likely noticed a harsh reality: the gap between a $999,000 listing and a $1,050,000 listing is massive. It’s not just $51,000—it’s the difference between needing a $75,000 down payment and a $210,000 down payment.
Understanding High Ratio Mortgages is critical for buyers in neighbourhoods like Malvern or Bendale, where prices hover right around that million-dollar mark. Here is exactly how it works and how it affects your buying power.
| Feature | High Ratio (Insured) | Conventional (Uninsured) |
|---|---|---|
| Down Payment | Less than 20% (Min 5%) | 20% or more |
| Home Price Limit | Strictly Under $1 Million | No Limit |
| Insurance Cost | Required (Add ~4% to loan) | $0 (Not required) |
| Interest Rates | Often Lower (Less risk) | Slightly Higher |
| Max Amortization | 25 Years | 30 Years |
1. The "Scarborough Cap" ($1 Million Rule)
This is the biggest pain point for our clients. The federal government does not insure mortgages on homes purchased for $1 million or more. This means:
- Buy for $999,999: You can put roughly 7.5% down (~$75k).
- Buy for $1,000,001: You MUST put 20% down (~$200k).
This rule effectively splits the Scarborough market. Condos near Kennedy Station and townhomes in Rouge Park are accessible with high ratio mortgages. However, detached homes in Agincourt or Cliffside often cross the $1M threshold, forcing buyers to have significantly more cash upfront.
2. Is High Ratio "Bad"? (The Rate Secret)
Many buyers think avoiding mortgage insurance is always better. Not necessarily. Because a high ratio mortgage is insured by the government (CMHC, Sagen, or Canada Guaranty), it is less risky for the bank.
As a result, lenders often offer their lowest interest rates to high ratio borrowers. If you are buying a starter bungalow in Birchcliffe-Cliffside for $950k, your rate might be lower than your neighbour who put 30% down on a $1.2M home. Use our calculator to see the difference.
The Semi-Detached Pivot
Priced out of detached homes in Wexford? Look at semi-detached homes. These often list in the $850k-$950k range, keeping you safely in "High Ratio" territory so you can buy with a smaller down payment.
Check Your Math
Don't guess on the down payment. If you are close to the $1M mark, the required cash jumps drastically. Use our Affordability Calculator to test scenarios.
3. The Insurance Premium Explained
If you put less than 20% down, you pay a premium. This isn't paid in cash upfront; it is added to your mortgage balance. For example:
- 5% Down Payment: Premium is approx 4.00% of loan amount.
- 10% Down Payment: Premium is approx 3.10% of loan amount.
- 15% Down Payment: Premium is approx 2.80% of loan amount.
While this adds to your debt, it allows you to enter the market years sooner than saving for 20%. In a rising market like Scarborough, getting in early often outweighs the cost of the insurance.
4. Where Can You Buy with a High Ratio Mortgage?
In 2025, finding high-ratio eligible properties requires looking at specific neighbourhoods and property types:
- Condos: Almost all condos in Scarborough qualify.
- Townhomes: Look in areas like Malvern and Morningside for options under $900k.
- Detached Fixer-Uppers: You can still find original condition bungalows under $1M in pockets of West Hill and Scarborough Junction.
Frequently Asked Questions
Can I buy a house in Cliffside with 5% down?
Only if the purchase price is under $500,000, which is rare for a house. For homes between $500k and $999,999, you need 5% on the first $500k and 10% on the remainder. If the price hits $1M, you need 20% down.
Does the $1 million cap apply to condos?
Yes, the cap applies to all residential property types. However, since most Scarborough condos trade below $1M, they are the most common property purchased with high ratio mortgages.
Can I extend my amortization to 30 years with a high ratio mortgage?
No. High ratio (insured) mortgages are strictly capped at a 25-year amortization. To get a 30-year amortization to lower monthly payments, you must put 20% down (Conventional Mortgage).
Is the insurance premium added to my mortgage?
Yes, the CMHC (or Sagen/Canada Guaranty) premium is added to your total mortgage amount and amortized over the life of the loan. You do pay interest on this premium.
What if I buy a home with a rental suite?
If the home is under $1M and you occupy one unit, you can use a high ratio mortgage. The rental income from the secondary suite can also help you qualify for a larger loan.
Are high ratio interest rates actually lower?
Typically, yes. Because the lender is protected against default by the insurance, they often offer rates that are 0.10% to 0.30% lower than uninsured mortgages.
Know Your Buying Power
Are you stuck near the $1M cap? Let us help you find the hidden gems that fit your budget and down payment strategy.
Run the Numbers
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