SO JUST WHAT IS MORTGAGE DEFAULT INSURANCE?
Mortgage default insurance, commonly referred to as “mortgage insurance or CMHC insurance” helps Canadians buy a home with a lower down payment. It allows as little as five per cent down.
Mortgage insurance protects the lender and investor – not the homeowner – from losses related to borrowers defaulting and foreclosure. Since it is considered a higher risk for lender, the government makes it mandatory for purchases with less than 20% down. As well, there are times that even with 20% or more down, you will require mortgage insurance.
The type of mortgage applied for and the amount of the down payment determines the premium, for a purchase it ranges from 0.50% to 7% (the is for a very specialized product so don’t freak out). The premium is added to the mortgage, so you don’t not have to pay it out of pocket ( unless you really want to then you can ).
In Canada there are currently 3 insures, CMHC – Canada Mortgage and Housing Corporation, GE – Genworth Canada and CG – Canada Guaranty. It depends on the lender which company they use, CMHC is a crown corporation vs the other two which are not. For the consumer it generally does not matter which company insures their Mortgage.
We are also very lucky have local representation for each of the 3 insurers who are always available to assist us and step in when needed.
Each site for the 3 Insurers provide extensive information and resources so check them out by clicking on the links.
Mortgage insurance is often confused with other types of insurance.
KEEP IN MIND THAT MORTGAGE DEFAULT INSURANCE IS NOT THE SAME AS:
Homeowner/Property Insurance: A form of property insurance designed to protect the individual’s home (or possessions in the home) against damages, including loss, theft, fire, or other unforeseen disaster.
Mortgage Life Insurance / Disability Insurance: A type of insurance designed specifically to repay any outstanding mortgage debt in the event of homeowner death or long-term disability.
If you have any questions talk to your mortgage broker…that’s what were here for!