What Are the Four Types of Mortgages in Ontario?

The word “mortgage” covers several very different products, and the differences matter: the wrong type can cost you thousands or leave you declined for no good reason. This guide breaks Ontario home financing into the four types you will actually encounter, who each suits, and how they differ on cost, speed, and qualification. I am Kia Pakravan, a licensed Ontario mortgage agent (FSRA licence #13380) based in Richmond Hill, and I arrange mortgages across all four categories.

Type 1: What is a conventional (low-ratio) mortgage?

A conventional — or low-ratio — mortgage is the standard bank mortgage where your down payment is at least 20% of the purchase price. Because the loan is under 80% of the home’s value, the lender’s risk is lower and no mortgage default insurance is required.

This is the cheapest financing available: the best rates, the widest choice of lenders, no insurance premium added to your loan. With 20% or more down, this is almost always your best option. It also applies at renewal — once your balance has dropped well below 80% of your home’s value, you are in conventional territory and can shop the full market. See how that process works on my renewals and refinancing page.

The catch is the down payment itself. On a $700,000 home, 20% is $140,000 — beyond many buyers, especially first-timers. That is where type two comes in.

Type 2: What is a high-ratio (insured) mortgage?

A high-ratio mortgage has less than 20% down. Because the lender takes more risk, the loan must be insured against default by one of Canada’s three mortgage insurers: CMHC, Sagen, or Canada Guaranty. The insurance protects the lender — not you — but it is what makes low-down-payment lending possible.

The premium is added to your mortgage balance, so you pay it gradually with interest rather than out of pocket at closing. It scales with your down payment: smaller down, higher premium.

High-ratio mortgages carry extra rules: standard insured lending caps the purchase price under $1 million, amortizations at 25 years, and the property must be your principal residence. Buying your first home with a modest down payment? Start with my home purchase mortgages page.

Type 3: What are second mortgages and HELOCs?

The first two types are about buying. The third is about borrowing against a home you already own — in two different forms:

A second mortgage is a lump-sum loan secured against your home, behind your existing first mortgage. You receive the full amount at once, make regular payments, and it carries a fixed term — often one to two years with private lenders. Typical uses: debt consolidation, renovations, covering a renewal shortfall, or accessing equity without disturbing a good first-mortgage rate.

A HELOC (home equity line of credit) is revolving credit secured on your home — draw what you need, when you need it, pay interest only on what you use, and re-borrow as you repay. HELOCs suit ongoing or unpredictable expenses: phased renovations or a business cash-flow buffer.

The key difference: a second mortgage is a lump sum with a defined repayment plan; a HELOC is flexible, reusable access. HELOCs are almost exclusively bank products with bank qualification rules — strong credit, verified income, solid equity. Private second mortgages are equity-driven and far more accessible when bank qualification is the problem.

Type 4: What is a private mortgage?

A private mortgage is funded by an individual or private lending company rather than a bank. It is arranged through a licensed mortgage agent — in Ontario, anyone arranging mortgages must hold an FSRA licence — and registered on title with the same legal standing as a bank mortgage.

Private lenders underwrite on equity first. Credit history and income documentation matter far less than the property value securing the loan, making private mortgages the answer for borrowers banks decline: bruised credit, self-employment income a bank will not fully recognize, urgent timelines, or stopping a power of sale.

The trade-off is cost and term. Private firsts typically run 7–12% and private seconds 10–14%, with lender fees of 1–3%. Terms are short — usually one to two years — because private lending is bridge financing: solve the immediate problem, then repair credit, sell, or refinance into prime lending. The advantage is speed and accessibility, with approvals in as little as 2 days when the file is organized. Full details on my private mortgages page.

How do the four types compare?

Which type is right for your situation?

Start with the cheapest option you genuinely qualify for. Buying with 20% down? Conventional. Buying with less? High-ratio insured. Already own and need funds? Compare a HELOC (if you qualify at a bank) against a second mortgage or a refinance.

Turn to private lending when standard channels fail: a bank decline, bruised credit, self-employment income, a tight deadline, or a power of sale. Private is not a lesser product — it is a different tool, and with a clear exit plan it solves problems nothing else can.

These four types cover residential borrowing. Financing an income property, a plaza, or a clinic is commercial mortgage territory — different lenders, different rules. I handle those too: see my commercial mortgages page.

Most borrowers do not need to choose alone. A licensed agent sees your full file — down payment, credit, income, property, timeline — and places it where it gets approved on the best available terms. That is the job.

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