What is mortgage loan insurance?

Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment. For more infomation, you can visit our financial services division at: http://www.signaturemortgage.ca/79.html

basically it's insurance that you pay in case you default, the bank gets their money back. It depends on the amount of your downpayment. If you email me your details, i'll send you a package and calculator so that you can figure out the costs, how they collect the premium and what you will pay out of pocket.

sara hamilton
416-662-5286
sara.hamiltoN@sympatico.ca

In case your downpayment is less than 20%, you are required to pay a mortgage insurance, in case of default, so the mortgage provider will get his money back. For more information, please do not hesitate to contact me at 4sobolewski@gmail.com
Thanks,

High Ratio (ie the ratio of Mortgage Amount to Property Value) Mortgage Insurance is offered by CMHC and a few other smaller players in Canada.

The original idea (National Housing Act)was to support New-Home buying after WW2 by reducing down payments to 5% and allowing buyers to borrow one mortgage at First Mortgage Rates.

The Alternative was 10-15% down, with a 75% First and the balance at Second Mortgage rates (2-10% higher).

The program was extended to Resale homes in ~1975.

Now very few transactions have a second mortgage as part of the Agreement of Purchase and Sale.

Today the insurance premiums vary with the type of property and the ratio of loan-to-value 60%, 65% etc up to 95%

The One-time Insurance premium is paid by the borrower (added to principal most often) while the beneficiary of the policy is the Lender - covering THEIR shareholders' risk for lending outside 'conventional' (originally 75% now 80%) mortgaging guidelines.

To evaluate the worthiness of Hi-Ratio insurance as a Borrower, the cost of the premium must be considered as an ongoing "borrowing expense" vis a vis the expenses to create any alternative way of financing the subject.(ie "borrowing expenses" can be upfront broker fees, appraisal fees, legal fees, standby fees etc + the interest/yr).

NB the fee covers that mortgage for as long as that mortgage exists.

If you move and "port" the mortgage with you, the premium is "still paid & in effect" even though you moved it to another house (with the same lender of course).

The premium is "still paid & in effect" on that mortgage amount, even if you increase the principal sum (with the same lender)

Compare all costs - upfront as well as the ongoing monthly costs to carry + the opportunity to buy with a lower down payment.

Typically, lenders require mortgage loan insurance for loans made to anyone that wishes to purchase a home with less than 20% of the purchase price. The Canadian Bank Act prohibits most federally regulated lending institutions from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than 20% down payment.

Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment.

To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.

To obtain CMHC Mortgage Loan Insurance, lenders pay an insurance premium. Typically, your lender will pass these costs on to you. Your lender will give you the exact price when you apply for a mortgage.

The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums.

Remember: without mortgage insurance you may avoid the insurance premium but you’ll typically pay much higher interest rates and additional administrative fees. At the end of the day, for the vast majority of borrowers, the cost of CMHC Mortgage Loan Insurance is more than fully offset by the savings achieved.

A 10% premium refund and extended amortization period without surcharge may be available when CMHC Mortgage Loan Insurance is used to finance an Energy-Efficient Homes.

Check the following link for more information.

Lina Castro, The Broker & Realtor that you Trust,
ADRESZ R.I. 514 636 2981
email: linacastrosells@hotmail.com

Referrals and Relocations to Montreal and Surrounding Cities, QC are welcome!

In addition "Mortgage Loan Insurance" might mean the Life Insurance offered by your Lender to pay off your mortgage in the event you or your spouse dies.

Quickly - do NOT buy the insurance offered by the Lender ... it's a good deal for the Lender .... but lousy insurance - you pay but they own the policy.

Get your own term (or other type) of Life Ins from a reputable Life Ins co and ask them to explain the differences - declining balance, constant payment, transfering the mortgage cancels the converage etc etc

check out this great article by the Toronto Star http://bit.ly/9cNbAf

A great article by the star? You don't hear that very often.
Lenders require a mortgage to be insured in instances where the downpayment is less than 20% of purchase price. With a buyer placing aminimum of 5% down they are able to qualify for conventional mortgage rates as the mortgage is insured against default.

MDI Mortgage Default Insurance. Insurance provided to the lender/bank in the event of default by the borrower/homeowner. There are three insurers in Canada. CMHC- run by the government,and two private insurers; Genworth formerly known as GE Capital and AIG.
They each have common threads in policy but Genworth still allows benefits to the self employed with no income verification and CMHC has benefits to the investor buying rental properties.

When you say mortgage loan insurance I will assume you are talking about the life insurance that the lender is offering you on the mortgage commitment.
It will show 2 types of insurance on your commitment.
The first that is added as a one time charge is the default insurance that you have to choice in taking. The other is likely life insurance against the mortgage amount you are signing for. This one is an optional one and can be declined. I suggest that you decline the one from the lender and look at getting some from a separate insurer. Your mortgage broker should be explaining this all to you at the signing stage or before. It is possible you already have enough life insurance so do not need more but it is always good to make sure.

Mortgage loan insurance is insurance that lenders require you to take if your downpayment is less than 20% of your purchase price. Before the housing collapse in the USA, many of the large U.S. mortgage insurers set up shop in Canada. Now, the dominant provider of mortgage loan insurance in Canada is CMHC. You will need to pay a premium for mortgage loan insurance, which varies depending on the purchase price of the home and the percentage of your down payment.

Actually it's a default insurance policy which you pay for when your downpayment is less than 20%. When its more than 20% DP, lenders will still get the insurance but they will pay for it themselves.
Insurance providers such as CMHC (government), Genworth (formerly GE) and Canada Guaranty (formerly AIG) are the mainstream providers. There are many other smaller providers too for private & customized lenders.
The purpose is to provide an assurance to lenders that if you default your mortgage and the lender cannot recoup their investment (mortgage), the policy will make up the difference.
The cost of the insurance premium is % of the amount borrowed based on the amount of downpayment & amortization. The more downpayment & shorter amortization, the lower the % charge for premium.

Peter K. Yeung AMP-BROKER
Accredited Mortgage Professional
Voted “Top Mortgage Broker” by Metro News
Broker # M08000585 - Brokerage # 10464
416-466-0033
pyeung@rmabroker.ca
Real Mortgage Associates Inc.
peter@ariesenterprise.com
www.ariesenterprise.com

There can be up tp three forms of insurance related to a home: Default Insurance, which is applicable when your downpayment (equity) in the initial home purchase is less than 20%. The second form of insurance is Creditor insurance, which is an optional insurance that will provide you with financial protection in the event of death or disability. Finally, there is Property insurance (fire insurance) to cover the home in the event of fire or other insurable events.

Cheerz,
Michael Goulbourne
RBC Mobile Mortgage Specialist
416 543 8140