Conventional Mortgages: Features and Benefits

What is a conventional mortgage

A conventional mortgage is a home loan where the down payment is at least 20% of the property’s purchase price. Because of this larger upfront equity, conventional mortgages do not require borrower-paid mortgage loan insurance.

This makes them fundamentally different from high-ratio (insured) mortgages, which are mandatory when the down payment is below 20%.

In simple terms, a conventional mortgage is considered a lower-risk loan from the lender’s perspective because the borrower has contributed significant equity. This can translate into more favourable borrowing conditions, though other factors like creditworthiness and property value still apply.

Tip: If you are close to the 20% threshold, speak with your advisor before finalizing your offer. A slightly larger down payment could eliminate insurance costs and improve your rate category.

How conventional mortgages differ from insured mortgages

Feature	Conventional Mortgage	Insured (High-Ratio) Mortgage
Down Payment	20% or more	Less than 20%
Mortgage Insurance	Not required by borrower	Mandatory, premium paid by borrower
Loan-to-Value Ratio	80% or less	Above 80%
Rate Impact	Often favorable, especially if insurable	Can be competitive due to reduced lender risk
Typical Borrower Profile	More equity, greater financial readiness	First-time or lower-capital buyers

With a conventional mortgage:

You avoid the cost of mortgage loan insurance, which can add thousands to your borrowing cost
The loan-to-value (LTV) ratio is 80% or less, reflecting a greater borrower investment in the property
Lenders may still insure these mortgages on their end (insurable mortgages), but you are not responsible for paying the premium

In contrast, insured (or high-ratio) mortgages:

Are required when the down payment is under 20%
Involve a premium paid by the borrower to a mortgage insurer like CMHC, Sagen, or Canada Guaranty
Often enable first-time buyers to enter the housing market sooner, despite the added cost

At Optimize, we ensure you understand these distinctions clearly — not just from a cost perspective, but also in terms of long-term financial impact.

When a conventional mortgage is the right fit

A conventional mortgage may be the ideal choice if:

You have saved at least 20% for a down payment
You’re purchasing a higher-value property that exceeds insurance limits (e.g., over $1 million)
You want to avoid additional costs associated with mortgage insurance premiums
Your financial situation supports larger upfront equity without compromising liquidity for other priorities

While conventional mortgages offer savings by eliminating insurance premiums, they also reflect a borrower’s greater financial readiness and lower perceived risk to lenders.

Important: Putting 20% down can reduce borrowing costs, but it also ties up more cash. If liquidity is important for other goals like investing or building an emergency fund, we’ll help you weigh the trade-offs carefully.

Important considerations for conventional mortgages

It’s essential to remember:

Even with a conventional mortgage, rates and terms vary based on lender policies
Some lenders may offer lower rates for insurable conventional mortgages (properties under $1 million with 25-year amortizations)
For non-insurable conventional mortgages (e.g., homes over $1 million, refinances, extended amortizations), rates may be slightly higher due to lender risk exposure

Optimize helps you understand where your mortgage fits within these categories, ensuring you’re not just focused on the label but on how it impacts your borrowing cost and flexibility.

Why this knowledge matters to you

Choosing a conventional mortgage isn’t just about avoiding insurance premiums. It’s about:

Ensuring your mortgage structure matches your financial strength and homeownership goals
Evaluating whether allocating 20% or more to a down payment is the right move, or if balancing other priorities (investments, liquidity) is more advantageous
Understanding how conventional vs. insured status affects your borrowing terms

At Optimize, we guide you through this decision holistically — considering your full financial picture to determine whether a conventional mortgage is the right fit for your strategy.