Types of Mortgages

There are two basic types of mortgages:

• Conventional mortgage: The loan amount does not exceed 80% of the property value, defined as the lesser of the purchase price or the appraised value.
• High-ratio mortgage, or National Housing Act mortgage: The amount is more than 80% of the property value (up to 95%). By law, a high-ratio mortgage must be insured against borrower default. The borrower pays a mortgage insurance premium (a percentage of the total loan amount) which can be added to the mortgage loan or paid in a lump sum in advance. The borrower must also pay an insurance application fee.