Mortgage Loan Insurance
What is Mortgage Loan Insurance?
Mortgage Loan Insurance (also referred to as “Default Insurance”) protects lenders/banks from loss due to borrower default on a mortgage. Default Insurance provides a necessary safety net to the financial system, helping to ensure the availability of mortgage funding.
Banking laws require Default Insurance when the down payment is smaller than 20% of the lesser of the purchase price or the appraised value of the property. Even when down payments are 20% or larger, lenders may still require Default Insurance due to individual borrowing circumstances, such as property location or property type. There are 3 insurer in Canada; CMHC, Genworth and Canada Guaranty.
Who pays the Default Insurance premium?
The borrower pays the insurance premium. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments. Most borrowers add the premium to their mortgage.
How do consumers benefit?
Consumers can become home owners sooner. Default Insurance enables consumers to borrow from us to purchase homes with a down payment as low as 5%, rather than needing to save 20%.
How much does Default Insurance cost?
Default Insurance is calculated as a percentage of the mortgage amount and is based on the size of the down payment and the amortization period.
The following table lists the standard premiums.
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