INSURED, INSURABLE & UNINSURABLE vs HIGH RATIO & CONVENTIONAL MORTGAGES
- johnathanmcquoid
- Jan 18
- 2 min read
If you think saving a 20% down payment earns you a reward… think again.
In today’s lending world, those who put less down often get lower interest rates — and those who save more may actually pay more.
Here’s why 👇
🏦 OLD SYSTEM: HIGH RATIO vs CONVENTIONAL
High Ratio Mortgage
• Less than 20% down
• Borrower pays mortgage insurance
Conventional Mortgage
• 20%+ down
• Lender could choose to insure or not
Sounds simple — but today’s rules made everything more complicated.
🏡 NEW SYSTEM: INSURED, INSURABLE & UNINSURABLE
Here’s what they mean:
🔹 INSURED
• Buyer pays the insurance premium
• Down payment is 19.99% or less
• Lowest interest rates
🔹 INSURABLE
• Lender insures it at their cost
• Property is under $1M
• Must qualify at benchmark rate
• Amortization capped at 25 years
🔹 UNINSURABLE
• Cannot be insured under federal rules
• Includes:
• refinances
• properties over $1M
• rental properties (1 unit)
• amortizations over 25 years
• equity take-outs over $200K
• transfers
These mortgages carry the highest interest rates.
📈 Why rates are different
INSURED = lowest risk for the lender → lowest rates
INSURABLE = medium risk → middle rates
UNINSURABLE = highest risk → highest rates
Rate differences can be:
👉 0.20%–0.40% higher for insurable & uninsurable mortgages
This is due to federal rule changes that limited how lenders insure their portfolios — increasing their cost, which gets passed on to borrowers.
📉 But wait… don’t higher down payments save money?
Not always.
Because insured mortgages get cheaper rates, many buyers pay less monthly with a smaller down payment.
The irony?
People who saved for years may end up:
❌ paying higher rates
❌ missing market appreciation
❌ waiting too long to buy
📊 Real Example
Using:
• 2.59% for insured (<20% down)
• 2.89% for conventional (20%+ down)
• 25-year amortization
• 1 year of market appreciation
BUY NOW
$300,000 purchase
5% down → $15,000
Mortgage insurance: $11,400
Monthly payment: $1,341.09
BUY NEXT YEAR
$356,700 purchase (18.9% increase)
20% down → $71,340
No insurance
Monthly payment: $1,334.40
The difference?
The “wait & save 20%” buyer ends up with:
✔️ a mortgage only $11,040 smaller
✔️ savings of only $6.69/month
❌ but paid WAY more upfront
❌ and missed out on a year of equity growth
⏳ So when is the right time to buy?
👉 Now.
Real estate doesn’t wait, and neither do interest rate changes.
If you want to know which category you fall into — and how to structure your mortgage for the lowest overall cost — message The Frontline Mortgage Group. We’ll walk you through every detail. 💬