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What is a Mortgage Insurance ?
When you need a
mortgage loan that is more than 75% of the purchase price of your home, mortgage
loan insurance is required. It protects the lender and, by law, most Canadian
lending institutions require it.
Having mortgage loan
insurance means that if you, the borrower, default on your mortgage, the lender
is paid back by the insurer - Canada Mortgage & Housing Corporation or a private
company. With the risk of losing their money removed, lenders have the
confidence to make mortgage loans of up to 95% of the purchase price of the
home. That means your down payment can be as little as 5% of the house price.
With mortgage loan insurance, many Canadians who might be unable to obtain a 25%
down payment can still buy a home
What Does a Mortgage Insurance
Cost?
First, you pay an
application fee. If you provide a valid appraisal, the fee is $75; otherwise,
it's $165. Neither the $75 or $165 application fee covers inspection or
appraisal services. Your interests are best protected by obtaining these
services through your own independent consultant.
Mortgage loan
insurance premiums range from 1.25%-3.75% of the amount of your loan (additional
charges may apply), depending on the size of the loan and the value of your
home. The premium can be added to your mortgage loan and paid off as part of
your regular mortgage payments, or paid off in a lump sum at the time of
purchase to save interest charges on the premium itself.
Mortgage Loan Insurance
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