Canadian Mortgage Types Explained for Immigrants (2025)

Ask any immigrant who’s tried to buy their first Canadian home and they’ll tell you: the mortgage conversation is where things get complicated. You sit across from a banker, maybe still getting used to the system, and you’re hit with acronyms: CMHC, GDS, TDS, LTV. Or hear terms like “CMHC-insured,” “fixed rate,” or “stress test.” If you’re lucky, you nod and pretend to follow. If you’re not, you walk out more confused than when you walked in.

The unfamiliar vocabulary isn’t the only issue; it’s the high stakes, your ability to buy a first home in Canada may hinge on getting these details right.

That’s why this guide exists. Mortgages are the backbone of Canada’s housing market. Understanding how they work (and which type fits your situation) can be the difference between finally owning a home or getting stuck renting for years.

Before diving into numbers and acronyms, it helps to know that mortgages in Canada fall into four main types: conventional or insured, and within each of those, fixed or variable. By lining up the pros and cons in each scenario, you’ll feel less overwhelmed and more confident in your path forward.

Every mortgage conversation in Canada starts with one fork in the road: do you have 20 percent to put down, or not? 

If you do, you qualify for what’s called a conventional mortgage. Put more simply, if you're putting down at least 20% of the home's value, you qualify for a conventional mortgage. That means:

It’s the gold standard, but few immigrants hit it right away because saving 20 percent / building a 20% down payment in cities like Toronto or Vancouver can take years. This leads many newcomers to the insured (high-ratio) mortgage.

If you don’t have 20 percent, you’ll go through the “insured” route. With this, you can buy a home with as little as 5% down, possibly rising to 10% for pricier homes. The catch: you must buy mortgage default insurance from CMHC, Sagen, or Canada Guaranty. You also have to deal with insurance premiums of 2.8 to 4 percent of your loan. Essentially, the tradeoff is a huge one.

Big news: as of December 2024, the insured mortgage eligibility cap rose from $1 million to $1.5 million up from $1 million. For newcomers in high-cost cities/ expensive markets, that’s a lifeline; this will let you buy that condo or townhome without jumping straight to a conventional mortgage.

But you’ll pay for that convenience. Say you borrow $500,000 with a 5% down payment. Expect to tack on about $20,000 to $25,000 in insurance premiums. That raises your overall loan and interest costs, but it also gets you into the housing market sooner. So, maybe you just have to pick your poison.

Once the question of insured vs. conventional is settled, you face another: fixed or variable rate?

Fixed-rate mortgages mean you lock in the same interest rate for the length of your mortgage term (usually five years). Your monthly payment doesn’t change, you know what you'll pay, and that stability helps with planning/ budgeting. For newcomers starting out, that predictability brings peace of mind.

With Variable-rate mortgages, on the other hand, your rate moves up or down with the Bank of Canada’s policy rate. Meaning it can be 0.2–0.5% cheaper than fixed rates right now, but your rate will shift with the Bank of Canada benchmark rate. 

During the pandemic, variable mortgages looked smart because the rates were rock-bottom. But as interest rates spiked in 2022–2024, many variable-rate borrowers saw their payments skyrocket. 

From June 2024 to March 2025, the Bank cut its policy rate seven times, bringing the overnight rate to 2.75% and prime to 4.95%. That helped push variable rates down in tandem. Still, if rates creep back up, your payments rise, with no set ceiling. For newcomers on tight budgets, the risk can be too much.

If we were to put it in TL;DR format: If rates drop, you save. If they rise, you pay more.

Canada doesn’t let you borrow based only on today’s rates. Lenders run a “stress test,” checking whether you could still afford your payments if rates were two percentage points higher. Even if you get pre-approved for a mortgage with a 4.5% rate, you must pass the stress test. That means qualifying as if your rate were 2% higher, so in this case, at 6.5%.

For a further example, if you’re offered 5.2 percent, you’ll be tested at 7.2 percent. 

It's meant to guard against sudden interest rate hikes or job loss, but it also reduces your approved amount, and it trips up many newcomers who don't budget for a buffer.

For immigrants, this often means you will qualify for a smaller mortgage than you expect. It’s frustrating, but it’s also a safeguard against losing your home if the economy turns.

A few less-talked-about mortgage options exist:

The hardest part isn’t choosing the mortgage type: it’s qualifying in the first place. Here’s what lenders typically look at:

Some banks, like RBC and Scotiabank, run newcomer (New-to-Canada) programs that accept foreign income or provide “no history required” mortgages if you have a large down payment (usually 35%+). You can look into them.

Financial advisors repeat one point: the cheapest mortgage isn’t always the best. Consider flexibility: can you pay off faster without penalties? Can you port your mortgage if you move? Immigrants often face career shifts or relocations, so portability is an important factor to consider.

Immigrants often ask, “Should I just take a variable mortgage now and switch later?” The answer’s not so complicated: unless you can comfortably afford significantly higher payments, stick with a fixed rate.

Rates have recently stabilized. As of late August 2025, the three-year fixed insured rate stands at ~3.64%, the five-year fixed at ~3.84%, and the five-year variable at ~3.90%. But these may not reflect all borrowers, as many mass-market fixed rates currently listed fall between 4.1–4.5%.

Forecasts suggest modest rate relief may come by the end of 2025, but lenders also expect at least one more cut.

For immigrants, Canadian mortgages can feel like a test of patience and paperwork. But once you understand the system, the choices get clearer. If you’ve got 20 percent down, aim for a conventional mortgage. If not, weigh the costs of insurance carefully. Decide if you value stability (fixed) or are willing to gamble (variable). Build your credit score early, and talk to lenders who understand newcomer realities.

And remember: mortgages aren’t just numbers; they’re the bridge between renting a temporary place and putting down permanent roots.

Until next time,