Loan-to-value ratioLTV (담보 대비 대출 비율)

What is it?

Loan-to-value (LTV) shows how much of the home’s value you borrowed, as a percentage. The math is simple: loan ÷ value × 100. If the home is worth $800,000 and the mortgage is $640,000, the LTV is 80%.

The “value” is usually the lower of the purchase price and the appraisal (the value set by an appraiser the lender sends). The federal regulation says that for a purchase, the value cannot be more than the price. So when the appraisal comes in below the price, your LTV goes up.

LTV is the mirror image of the down payment. A 20% down payment means 80% LTV; a 5% down payment means 95% LTV. Lenders see a lower LTV (more of your own money) as a safer loan.

The numbers that matter

B-20 is an OSFI guideline for federally regulated lenders (banks, trust companies and so on). Ontario credit unions and private lenders may use different rules.

Why 80% matters

• When you buy: above 80% LTV you must have mortgage default insurance (CMHC, Sagen or Canada Guaranty) and meet all the insurance rules, such as a price below $1,500,000 and the GDS/TDS limits. At 80% or below, insurance is not required by law, but a federally regulated lender such as a bank still reviews you under its own rules, GDS/TDS and the stress test. The federal budget of November 5, 2026 proposes raising the home price limit for “optional mortgage insurance” from $1,000,000 to $1,500,000 and allowing 30-year amortizations, “provided that at least one borrower is a first-time home buyer or the home is newly built” (the budget’s words; it gives no more detail). That is not law yet and has no date. The budget does not define “optional” insurance. Reading it as insurance on loans with 20% or more down (low-ratio insurance) is our interpretation.
• When you refinance (replace your mortgage with a bigger one to take out cash): the federal rules do not allow insurance on a refinance, so lenders normally lend up to 80% of the value. With a $1,000,000 home and a $500,000 balance, the mortgage could grow to $800,000, freeing $300,000 (a reference calculation).
• When you switch: if you move an uninsured mortgage to another federally regulated lender at renewal (a straight switch), OSFI tells the new lender to assess it like any other new loan, so the value and LTV may be checked again. On a refinance, B-20 says LTV should be recalculated.

Where does 65% come from?

A HELOC (home equity line of credit) is a “revolving” loan secured by your home: you can pay it down and borrow again. In Guideline B-20, OSFI expects federally regulated lenders to cap that revolving part at 65% of the home’s value. The remaining 15% (up to 80% in total) can only be a regular amortizing mortgage that is paid down on a schedule.

For example, with a $1,000,000 home and no other loans, the revolving HELOC can be at most $650,000, and HELOC plus mortgage together at most $800,000. If the home’s value falls or your finances change, the lender can review the limit.

When the appraisal comes in low

This can happen in a competitive market. Because the lender uses the lower of the two values, you can borrow less and must cover the gap with your own money.

Estimates for reference only. If your offer is firm with no financing condition, you must still close even if you cannot cover the gap, so check your pre-approval and the appraisal risk before you offer.

Example

Things to watch

• If you borrow the down payment (line of credit, personal loan) to lower LTV, the lender treats that as debt and counts it in TDS. B-20 asks for a letter confirming a gift does not have to be repaid, and for stricter review of borrowed funds. “Cash back” incentives do not count as down payment.
• Stacking a second mortgage or private loan on the same home to push the combined LTV above 80% is a structure B-20 tells lenders not to allow. The loans are added together.
• When home values rise, your LTV falls on its own. At renewal or refinance a few years later, a new appraisal may show you qualify for better uninsured terms.