1. What is High Ratio Premium?

High Ratio Premium is an insurance premium charged for mortgages where the loan-to-value ratio exceeds certain thresholds. It protects lenders against default risk when borrowers have smaller down payments.

2. How Does the Calculator Work?

The calculator uses the premium formula:

Where:

• \( Loan\ Amount \) — Total mortgage amount in currency
• \( Premium\ Rate \) — Insurance rate expressed as percentage

Explanation: The premium is calculated by multiplying the loan amount by the premium rate percentage (converted to decimal).

3. Importance of Premium Calculation

Details: Accurate premium calculation is crucial for borrowers to understand the total cost of their mortgage and for lenders to properly assess risk exposure and insurance requirements.

4. Using the Calculator

Tips: Enter the loan amount in currency and the premium rate as a percentage. Both values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: When is high ratio premium required?
A: High ratio premium is typically required when the down payment is less than 20% of the property's purchase price.

Q2: How is premium rate determined?
A: Premium rates are set by mortgage insurers and vary based on loan-to-value ratio, borrower creditworthiness, and other risk factors.

Q3: Can premium be added to the mortgage?
A: Yes, in most cases the premium can be added to the mortgage principal and paid over the loan term.

Q4: Are premium rates the same for all lenders?
A: Rates may vary slightly between different mortgage insurers and lenders, but generally follow similar tiered structures.

Q5: Is high ratio premium refundable?
A: Premiums are generally not refundable, though some insurers offer partial refunds under specific circumstances when the mortgage is paid early.