Why a Bigger Down Payment Doesn't Mean a Better Rate

<p>Scott Dillingham is a licensed mortgage broker who has helped clients finance over $1 billion in real estate. He works closely with REALTORS® to help their clients get financing approved — and in this episode, Scott breaks down one of the most misunderstood topics in Canadian real estate: why putting more money down doesn't always mean you'll get a better interest rate.</p><p>Scott walks through the three types of residential mortgages in Canada — insured, insurable, and conventional — and explains exactly how each one affects the interest rate your clients will be offered. Many buyers are shocked to learn that a 5% down payment can actually result in a lower rate than a 20% down payment, and Scott explains the mechanics behind this in plain language you can use with your clients.</p><p>From CMHC default insurance to bulk backend insuring, Scott demystifies the lender's perspective on risk and pricing. He also covers the quirky amortization limitation that comes with insurable mortgages — why a client with 20% or more down is capped at a 25-year amortization if they want to access better rates — and how that stacks up against the newer 30-year amortization available to first-time buyers with less than 20% down.</p><p>Scott also covers special-case scenarios where lenders will require CMHC insurance even on high-down-payment deals — such as properties near commercial zones or train tracks — and how that can actually work in the buyer's favour by unlocking better rates. This episode is packed with conversation starters you can use to keep hesitant buyers off the sidelines and moving toward a purchase.</p><p>Key Takeaways</p><ul><li><strong>Insured mortgages (less than 20% down) typically have the best interest rates</strong> because the lender's risk is fully covered by CMHC, Sagen, or Canada Guaranty default insurance.</li><li><strong>Insurable mortgages (20%+ down with backend bulk insurance) offer the next best rates</strong> — no fee to the borrower, but the lender secures group insurance behind the scenes at a discounted cost.</li><li><strong>Conventional mortgages (20%+ down, no insurance) carry the highest rates</strong> because the lender absorbs all risk in the event of a default.</li><li><strong>Clients with 20% or more down are capped at a 25-year amortization</strong> if they want insurable rates, while those with less than 20% can access 30-year amortization as first-time buyers.</li><li><strong>The CMHC fee for a 5% down purchase is 4% of th