Archive for January, 2013

What Is Mortgage Default Insurance?

Sunday, January 20th, 2013

InsuranceMortgage insurance is charged to borrowers to provide assurance to the lender that the loan will be paid in case of default. With this up and down economy and the looming possibility of rate increases, it is prudent to consider getting this type of insurance to protect yourself and your family.

 

What Are The Requirements For Eligibility?

The home you plan to purchase must be located in Canada and the minimum mortgage term is six months with maximum amortization period (term of the loan) of 35 years.

Borrowers must make a down payment equal to at least 5% of the purchase price and your income must be adequate to afford the mortgage payments as well as other debt payments.

Mortgage insurance premiums may be paid in a lump sum at closing or may be included in the monthly mortgage loan payment.

How Much Will I Pay?

The fees for mortgage insurance premiums range between 1% to 7+% of the principal value of the home. The rates are established based on the borrower’s credit rating, the loan to value ratio (loan amount divided by the purchase price) and the term of the loan amortization (process of paying off a mortgage in regular payments).

These fees are usually added to the mortgage amount and are not paid in advance. One of the advantages of paying for mortgage default insurance is that you can make a smaller down payment on your mortgage.

Where Can I Buy Mortgage Default Insurance?

In Canada mortgage default insurance is required by a majority of lenders when a homeowner puts down less than 20%.  The biggest mortgage insurers in Canada are CMHC, Genworth, and AIG–in that order.

Be  sure to ask me about the various kinds of Insurance you should obtain in order to protect your biggest financial asset!

Call Justin at 604-736-1855