 Sam
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Joined: 21 May 2005
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Location: CALIFORNIA
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 Posted: Fri Jul 02, 2004 4:18 am Post subject: High Ratio Mortgage |
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High Ratio Mortgage is a mortgage, which offers a loan amount greater than 75% of the mortgaged property value or appraised value. It is also known as National Housing Act Mortgage.
Characteristics of High Ratio Mortgage:
- Minimum Down Payment - It requires a minimum down payment of 5%.
- High Loan to Value Ratio - It has a very high loan to value ratio. Here the mortgage amount is higher than borrower's cash down payment.
- Subject to default Mortgage Insurance - It requires insurance to protect the lender against buyers default. This insurance is available from Canada Mortgage and Housing Corporation (CMHC) or GE capital at a cost of approximately 2% of the loan.
- High cost - Mortgage insurance premiums by the borrower increases the cost of this type of mortgage.
- High rate of Interest - It carries a very high rate of interest and it is often very difficult to qualify for.
- Finances higher percentage of property value - Finances a higher percentage - 75% to 100% of the purchase price of the property.
- Provision For Application Fee - It also requires a borrower to pay an application fee which he/she can add to the mortgage amount.
- Exceeds Conventional mortgage limits - It is a loan which exceeds the limits of conventional mortgage in regard to loan to value ratio.
- Total Debt Ratio - A borrower should have a total debt ratio of 40% or less of his/her gross monthly household income.
- Insurance premium Fee - A borrower is also required to pay an insurance premium fee. It is a cost of home insurance. The premium could be up to 4.25% of the amount of the loan.
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