Lowering Loan-to-Value Ratios for Homebuyers

Watch your loan-to-value ratio if you want the best mortgage interest rates.

Minimum down payments of 5%-10% can get you lower rates. 

On the other hand, you may be able to better withstand real estate market shocks if your all-important loan-to-value ratio is as low as possible.

Quick Read

What does a low loan-to-value mean?

Does lower LTV mean lower interest?

Is it better to have a higher or lower loan-to-value?

How do I lower my loan-to-value ratio?


What Is Your LTV?

Here’s what’s key about a low loan-to-value ratio – the more of your own money you invest in a real estate property, the lower your loan-to-value ratio. What can having a low loan-to-value ratio mean for you? Primarily more options.

Home buyers who can afford 35% down on a $700,000 home ($245,000) have to borrow less. Making annual lump sums can reduce your mortgage sooner. How lump sum payments can work to your advantage

Conventional and private lenders may line up for your business.

Lower LTV Doesn’t Mean Lower Interest Rates

While a lower loan-to-value ratio may seem desirable, you’ll pay a premium for it.

Borrowers with lower down payments and higher loan-to-value ratios get preferential interest rates. That’s because loans with 20% or less down (that high loan-to-value ratio) are insured against default.  

Canadian lending laws require high ratio mortgages, loans for between 90% and 95% of a home’s fair market price, to be insured by CMHC (Canada Mortgage and Housing Corporation), Canada Guaranty, or Sagen™. How Canada Guaranty mortgage default insurance works. Buy a vacation home with 5% down from Sagen™ 

So while you may have less initial equity (ability to borrow money against your home’s value because of that low down payment), your lender is fully compensated if you can’t make your mortgage payments. What a CMHC high ratio mortgage will cost you.  

Lower loan-to-value ratio mortgages don’t enjoy that luxury. Lenders take a bigger risk on lower loan-to-value clients because if they default, the lender has to cover the cost themselves. And that means foreclosing or getting power of sale through a court to sell the property, often at a loss. How to stop power of sale

Lowering Loan-to-Value Ratios

But if owning more of your home sooner matters to you, paying off debts is a sure way to improve your overall credit worthiness. So is making larger down payments that bring your loan-to-value ratio to at least 80%, with 20% down. You can still get mortgage loan default insurance with a lower loan-to-value ratio of up to 65% (that’s 35% down). You’ll just pay a lot more for it. Use your RRSP for your down payment

Why You Need a Real Estate Lawyer 

Axess Law reviews your offer to purchase to advise you how to protect your new or resale home purchase. We read all the fine print for subject-to conditions to ensure you understand the condition your home is in, before you buy it. 

Our licenced real estate lawyers can make your offer conditional on the sale of your current home. If you’re concerned about qualifying for mortgage financing, we negotiate with the seller’s lawyer to make an amendment to the agreement of purchase and sale that extends the completion date. 

When a professional home inspection finds minor repairs or major issues like subsiding soil, your Axess Law real estate lawyer contacts the seller’s lawyer. We advise you whether a seller will make repairs at their own expense or reduce their price.

Our professional legal team can discharge your existing mortgage and witness your signature on new loan obligations. Your new property is registered in your name at a local land registry office. We can add a spouse or family member to title now or whenever you’re ready. Transfer property title to family member in Ontario. Your Axess Law real estate attorney can even hand you the keys to your new home. What is the real estate closing process (Ontario).

Affordable Real Estate Lawyers, Anywhere You Are 

Access lawyers for less in the Greater Toronto Area, Ottawa, or anywhere in Ontario  when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it. 

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Virtual Law Services for Less

Axess Law’s virtual real estate lawyers video conference with you anywhere in Ontario. You can talk to a lawyer from home or office 7 days a week. Use any computer or compatible mobile device to connect with use securely and confidentially. If you’ve never used virtual video conferencing software before, we show you how. 

Find a virtual real estate lawyer near me. 

Make Online or Phone Legal Appointments

Make legal appointments online with our easy online booking form or call us directly to find the most convenient times for you. Dial our 647-479-0118 lawyer line in Toronto or toll free to 1-877-402-4207. We can meet with you at any conveniently located Axess Law office in the Greater Toronto Area or Ottawa. 

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Click here to learn more about Axess Law’s real estate law services.