In Canada, mortgage insurance is also referred to as mortgage default insurance. This is required for all buyers who have paid between 5% and 19.99% toward their home’s down payment. You will not be able to obtain a mortgage if you pay less than 5% of your home’s purchase price.
This extra insurance is to protect the lender in case the borrower defaults on their payments. By paying less than 20% of your down payment, you are considered to be a high-risk borrower. Lenders will require that you get this insurance for extra security knowing they are protected in case you fail to make a payment. It is worth noting that this insurance only protects the lender. The borrower is paying for this insurance but it does not protect them whatsoever.
Benefits of Mortgage Default Insurance
Even though buyers are having to pay an additional expense monthly, by having mortgage default insurance they are still able to gain access to the market. This is very advantageous for borrowers who have a low income because without this insurance you might not have been able to obtain an Oakville mortgage at all.
Another benefit for having this insurance is that you will be able to make affordable monthly payments. If you pay less than 20% of your down payment and do not have this insurance, your mortgage interest rates could be unrealistically high.
Mortgage Default Requirements
In order to qualify for this insurance, your loan term cannot exceed 25 years. Another requirement is that the value of your home cannot be more than $500,000. If your home is within $500,000 and $999,999, you will have to pay a minimum of 5% for the first $500,000 and 10% towards the remaining balance. If your home is over $1 million, you cannot obtain mortgage default insurance at all because you will be required to pay 20% of your down payment.
How To Get Mortgage Insurance
In Canada, you can obtain mortgage insurance from one of three companies: Canada Guaranty, Genworth Financial, and the Canada Mortgage and Housing Corporation (CMHC). For more information on how to get this insurance, please contact your local Oakville mortgage broker at 289-337-4029.
If you would like to know any additional information regarding mortgage default insurance, or if you are wanting to get started on your Oakville mortgage application today, please contact the Loewen Group Mortgages team at 289-337-4029.