A buyer in Markham is securing a mortgage with a loan-to-value (LTV) ratio of 90%. Which of the following statements accurately reflects the implications of this LTV ratio under current Canadian mortgage regulations?

Question: A buyer in Markham is securing a mortgage with a loan-to-value (LTV) ratio of 90%. Which of the following statements accurately reflects the implications of this LTV ratio under current Canadian mortgage regulations?

Answer options: ✅ The mortgage will automatically be insured by CMHC, as any LTV exceeding 80% mandates mortgage default insurance.

• The lender may require the borrower to pay a higher interest rate due to the increased perceived risk, even with mortgage insurance.
• The mortgage is considered a conventional mortgage, as its LTV is above 65% but below 95%.
• The buyer will be exempt from paying any mortgage default insurance premiums as the LTV is below 95%.

Correct answer: The mortgage will automatically be insured by CMHC, as any LTV exceeding 80% mandates mortgage default insurance.

Explanation: Mortgages with an LTV ratio exceeding 80% (i.e., a down payment of less than 20%) are considered high-ratio mortgages and, by law, require mortgage default insurance in Canada, typically from CMHC, Sagen (formerly Genworth Canada), or Canada Guaranty.