Second Mortgage Program
Provides borrowers with a Second Mortgage to be registered against their property up to 95% combined LTV on a purchase.
This program provides borrowers with the additional flexibility of allowing a Second Mortgage to be registered against their property up to 95% combined LTV on a purchase.
Acceptable Loan Purpose and Applicable Loan-to-Value Limits
Purchase Transactions
- 95% Combined Loan-to-Value (CLTV) based on first and second mortgages
- Property value ≤ $500,000 – 5% down payment required
- Property value > $500,000 and < $1,500,000 – 5% down payment required up to $500,000, with an additional 10% down payment on the portion of the home value above $500,000.
Special Conditions
The first mortgage must be Sagen insured under any of the following scenarios:
- Purchase / Purchase Plus applications
- Combined Loan to Value (CLTV) is > 90%
- Business for Self (Alt. A) Program applications
Under all scenarios, the first mortgage must meet the following conditions:
- Current at time of second mortgage application with stable repayment
- Second mortgage agreement must contain cross-default clause (default on the first mortgage constitutes default on the second mortgage).
- In the event of a re-advanceable first mortgage, no amount may be re-advanced until after the second mortgage is paid out.
- If CLTV > 90%, the first mortgage must be held by the same Lender.
Eligible Properties
- Maximum 4 units where at least 1 unit must be owner occupied
- New construction covered by a Lender approved New Home Warranty Program*
- Existing resale properties
- Readily marketable residential dwellings, located in markets with demonstrated ongoing re-sale demand
- Estimated remaining economic life of the property should be a minimum of 25
- In addition, for 3 and 4 units, the property must meet the following criteria:
- Municipal zoning
- Fully self-contained units
*For new construction properties in the territories (Yukon, Northwest and Nunavut Territories) where New Home Warranty is not an option, Lenders must obtain either the occupancy permit or a third-party report from a qualified professional such as: an inspector, architect or engineer. The qualified professional must carry the appropriate liability insurance and confirm construction is completed in compliance with applicable bylaws and regulations.
Maximum Property Value
- > 80% LTV: Property value must be less than $1,500,000
- ≤ 80% LTV: Property value must be less than $1,000,000
Qualifying Terms and Interest Rates
- Fixed, standard variable, capped variable and adjustable rate mortgages are permitted
- Maximum interest rate term of 25 years
- The qualifying interest rate is the greater of the contract rate plus 2 % or 5.25 %.
Amortization Options
- Up to 30-year amortization
- For greater than 25-year amortization LTV must be >80%, and one of the following applies.
- A minimum of one applicant must meet first-time homebuyer’s criteria; OR
- Purchase of a new constructed home.
Premium Rate
The premium payable will be the lesser of the premium of the combined first and second loan amounts, or the premium of the second mortgage amount only based on the rates below:
| LTV Ratio | Combined 1st & 2nd Loan Amounts | 2nd Mortgage Amount |
|---|---|---|
| Up to 65% | 0.60% | 0.60% |
| 65.01% - 75% | 1.70% | 5.90% |
| 75.01% - 80% | 2.40% | 6.05% |
| 80.01% - 85% | 2.80% | 6.20% |
| 85.01% - 90% | 4.00% | 6.30% |
| 90.01% - 95% | 4.00% | 6.30% |
The above chart is for mortgages with an amortization that is 25 years or less. If a mortgage is eligible for an amortization greater than 25 years (up to 30 years) an additional premium of 0.20% will apply.
For submissions of new insured concurrent first and second mortgages the premium payable on each mortgage will be based on the cumulative LTV of the combined first and second loan amounts.
The mortgage insurance premium is non-refundable, paid at the time of closing and may be added onto the mortgage.
Borrower Qualification
Income and Employment
- Standard income and employment verification requirements
Credit
- A minimum credit bureau score of 680 is recommended.
Down Payment
- Qualified home buyers may use traditional down payment sources including personal savings, RRSP withdrawal, a non-repayable gift from an individual related to the borrower through a familial or legal relationship, sweat equity, existing home equity, and proceeds from sale of property
Additional Criteria
- The mortgage payment to be used on the first mortgage for qualification purposes will be the greater of the actual P+I payment or the calculated P+I payment based on the greater of the contract rate plus 2 per cent or 5.25 per cent.
GDS / TDS Guidelines
| GDS | TDS |
|---|---|
| 39% | 44% |
Documentation / Information Requirements
- Standard documentation requirements
- Sagen may request that the Lender provide a copy of the required documentation on a case-by-case basis.
- For 3 and 4 unit properties Sagen requires that the Lender obtains a general assignment of rents and leases or include this requirement in the Standard Charge Terms.
Portability
- Sagen mortgage insurance is portable, so home buyers can take advantage of a Lender’s portability For further details, refer to the Portability Feature product overview.
Assumptions / Assignments
- Mortgage is assumable subject to meeting Lender guidelines.
Eligible Products*
- Business for Self (Alt. A) Program
- Homebuyer 95 Program
- Purchase Plus Improvements Program
- Vacation / Secondary Homes Program (Type A Properties)
*For specific underwriting guidelines related to the above eligible products, please refer to the applicable product overview.
Ineligible Products
- Borrowed Down Payment Program
- New to Canada Program
- Progress Advance Program
- Vacation / Secondary Homes Program (Type B Properties)
- Investment Program
- Family Plan Program
