What is mortgage insurance?
It is an insurance applied by the lender when the purchaser cannot come up with a down payment of 20% or if the real estate is outside the lenders normal area of lending. It protects the lender if the homebuyer defaults on the mortgage loan.
Who is the insurer?
There are 3 mortgage insurers in Canada:
- CMHC – Canada Mortgage and Housing Corporation is Canada’s national housing agency. It is a government-owned corporation.
- Genworth Canada – is the largest private residential mortgage insurer in Canada
- Canada Guaranty — Canada Guaranty Mortgage Insurance Company is 100% Canadian-owned private company owned by the Ontario Teachers’ Pension Plan and National Mortgage Guaranty Holdings Inc.
Who pays for the mortgage insurance?
- The client pays for the insurance. It is added to the mortgage at time of purchase. The homebuyer does have an option to pay for it upfront at the lawyer’s office, but this rarely happens.
How is the mortgage insurance premium calculated?
- The mortgage insurance premium is based on the Loan to Value and is broke down as follows:
*65% to 80% Loan to Value premiums are at the lenders discretion
** is for purchases only.
Why use mortgage insurance?
- Allows first time homebuyers to purchase real estate with as little as 5% down.
- It is beneficial to the buyer market. Without it, mortgage rates would be higher, as the risk of default would increase. Lenders are able to offer lower mortgage rates when mortgages are protected by mortgage insurance, as the risk of default is spread across multiple homebuyers.
- Depending on the location of the real estate sometimes a lender won’t go into certain areas because they feel they are put at risk; with the real estate mortgage insured they will.
For more information on your mortgage options, contact Elise Hildebrandt, AMP Broker Lic #316103 with The Mortgage Centre, Brokerage Lic # 315847 at 306-221-2373