Over $1.5 million and no mortgage insurance: why a bigger down payment can get a higher rate, and how to compare

Rates come in three tiers: insured, insurable by the lender, and uninsurable

Tier one is insured: under 20% down, mortgage insurance is required, and the price has to be under $1.5 million. The insurance protects the lender — if you can't pay, the insurer pays the lender; it doesn't protect your home.

Tier two is 20% or more down, but a mortgage that fits the insurance rules: some lenders insure batches of these loans themselves (portfolio insurance) so they can fund them through government-sponsored securitization programs, and pricing in this tier is often good too. The conditions include a purchase (not a cash-out refinance), an amortization of no more than 25 years, and a property value under the set cap.

Tier three is uninsurable: a price of $1.5 million or more, a cash-out refinance (with one exception: since January 15, 2025, a refinance to build a secondary suite can be insured), an amortization longer than insurance allows, and so on. A home at $1.5 million or more is in this tier no matter how much you put down.

Why uninsured mortgages are priced a little higher

With an insured mortgage, the insurer bears the loss if a borrower defaults; with an uninsured one, the lender does. As the Bank of Canada explains, the money lenders lend out comes from depositors and investors, and that funding cost makes up most of your mortgage rate. Insured mortgages carry less risk and have more funding channels, so they price lower.

That's how it happens: in the same month, a friend buying a $1.2 million home with 10% down gets a lower rate than you do on a $1.8 million home with 30% down. Your file isn't weaker — the two mortgages simply sit in different tiers.

The rule is the same for everyone. At mainstream lenders, income and credit mainly decide whether you're approved and for how much; which rate tier you land in starts with whether the mortgage is insured.

The $1.5 million line: cross it and both the down payment and the rate change

Under $1.5 million, the minimum down payment is 5% of the first $500,000 plus 10% of the portion above $500,000. At $1.5 million or more, it's 20% of the purchase price.

An example (illustrative numbers): on a $1,450,000 home, the minimum down payment is $500,000 × 5% + $950,000 × 10% = $120,000, and the mortgage can be insured. On a $1,550,000 home, it's $1,550,000 × 20% = $310,000, the mortgage can't be insured, and the rate comes from tier three. A $100,000 difference in price means a $190,000 difference in the minimum down payment.

Exactly $1.5 million counts as "$1.5 million or more," so it can't be insured. Many detached houses in Metro Vancouver, and plenty of new townhomes and larger condos, sit right around this line, so know which side you're on before you start viewing. Either way, federally regulated lenders apply the stress test, insured or not.

How to compare: same basis first, then ask about down-payment tiers

Step one, make the quotes comparable: same term, same amortization, same loan amount, and every quote from the uninsured tier — don't compare one lender's insured rate with another's uninsured rate. Banks, credit unions and mortgage-only lenders price this tier quite differently, so compare several.

Step two, ask about down-payment tiers. Some lenders price by loan-to-value bands — for example, 35% or more down (a loan under 65% of the price) may get a slightly lower rate. It isn't a rule and it varies by lender; whether putting more down is worth it is something to work out from actual quotes.

Say a couple who are both doctors buy a $2.2 million house on Vancouver's West Side and could put down either 25% or 35%. If the extra 10% ($220,000) only buys a rate 0.1 points lower, that's roughly $1,430 a year in interest on a $1.43 million mortgage — weigh that against what the $220,000 could do elsewhere. The math is the same for a partner at a law or accounting firm, a tech employee or an executive.

Beyond the rate: what matters more for high-income buyers

Prepayment privileges: partner draws at a law or accounting firm, stock for tech employees, big commissions for salespeople and bonuses for executives often go toward a large paydown once a year. How much you can prepay each year, and whether going over triggers a penalty, affects your total cost more than a few hundredths of a point on the rate.

The penalty formula: with a large balance, the IRD can be a big number. Ask which two rates the IRD compares before you sign — see Switching lenders for a lower rate: how the penalty is calculated, and when switching pays off.

Whether to pair it with a line of credit: some products combine the mortgage with a HELOC, so principal you pay down becomes available to borrow again. The HELOC portion can go up to 65% of the home's value, and the mortgage plus the line of credit up to 80% combined. One thing to know: switching a combined product to another lender at maturity isn't covered by the stress-test exemption from the Office of the Superintendent of Financial Institutions (OSFI), which applies only to a stand-alone mortgage.

Common questions

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