Mortgage Insurance? Life Insurance? I'm confused...
It's so exciting when you save up that 5% Down Payment and you are finally able to afford a house.
The wind is quickly let out of the Sail though as soon as you see the Insurance cost required to get your mortgage....it can be as high as 4.90% for some folks!
Here in the Great White North, we have 3 Mortgage Insurance providers. They are CMHC, Genworth Financial, and Canada Guaranty.
They are nearly identicle with a few wavering product differences, but all in all they do the same thing...they protect your lenders money.
But what is it? Do you need it? How do I pay for it? Is it negotiable?
What is it? Mortgage Insurance is also referred to as "Mortgage Default Insurance". It helps Canadians buy a home sooner and with a lower down payment...as low as 5% for qualified borrowers. Mortgage Insurance is NOT Life Insurance. Life Insurance is what you need in case you Die. That's an entirely different animal - but it's optional and is discussed with clients case by case as it pertains to them.
Do you need it? If you have a down payment of less than 20%...then you need it. If you have a down payment of 20% or larger...you may not need it...even if you have 25% to put down...you still may need it.
How do I pay for it? Good News - the lender adds the insurance cost to your mortgage and they pay it directly to the Mortgage Insurer.
Is it negotiable? No. Mortgage Insurance is non-negotiable. It is set up on a sliding scale based on the size of your down payment and/or the product you require.
To learn more about Mortgage Insurance, we encourage you to visit CMHC's link below:
The LTV (Loan to Value) falls in the Up to and including 95% category...that means you are borrowing 95% of the amount needed to buy your house.
The other figures you see there apply to refinances...typically refinances are restricted toa maximum of 80% LTV...so the premium there, if the lender chooses to insure - would again be 3.15%. In most cases this premium is absorbed by the lender. In other cases it is not.
These figures are different if you are self employed. For more information on that stuff...click over to our Self Employed Section.
Fun fact about Energy Efficient Homes...you can get up to 10% of your Mortgage Insurance Premium back in your pocket if your home qualifies!!
Another Fun fact...our Mortgage Calculator already takes in to account your potential Mortgage Insurance Premium! Hurry - go check it out. We're pretty proud of it!
