Definition
A conventional mortgage is a loan with a loan-to-value ratio (LTV) of at most 80% — that is, with a down payment of at least 20%. Mortgage default insurance (CMHC, Sagen, Canada Guaranty) is not mandatory; it remains possible if the lender deems it prudent, in which case the lender bulk-insures the portfolio.
Advantages: amortization up to 30 years (35 years at some alternative lenders), no upfront CMHC premium, more flexibility on eligible properties (cottages, 1-4 unit rentals, complex new builds).
Drawbacks: interest rate typically 10 to 20 bps higher than equivalent insured, because the lender retains credit risk. On refinances, the maximum LTV is capped at 80% under OSFI B-20 rules since 2016 — a refinance is therefore always conventional.