Mortgage Default Insurance
In Canada, the government has put in place an insurance that makes home-ownership more accessible. Learn more about this insurance below!
What is Mortgage Default Insurance?
Mortgage default insurance is a very common and necessary portion of the overall cost of mortgages in Canada. For many people in the Greater Toronto Area, a 20 percent down payment is not feasible due to the high cost of homes, so this insurance is used to allow people better access to the housing market by making a smaller down payment on a home. The insurance allows lenders to keep mortgage interest rates lower than they would be without the default insurance, and protects them should homeowners default or stop making mortgage payments.
What is the cost of Mortgage Default Insurance?
The cost of this mortgage default insurance ranges from 2.80 to 4.00 percent of the mortgage amount (Home Price minus down payment), is added to the overall mortgage amount, and differs depending on the size of the down payment received (see below).
What are the requirements of Mortgage Default Insurance?
There are some requirements you have to meet in order to qualify for mortgage default insurance:
The maximum amortization for insured mortgages is 25 years.
If the purchase price is between $500,000 - $999,999 a higher down payment is required. The minimum down payment is 5% of the first $500,000, and 10% of the remaining amount.
Mortgage default insurance is not available on homes purchased for more than $1 million; this means that a 20% down payment is required on these homes.
Where do you get mortgage default insurance?
There are only three companies that provide this insurance in Canada; Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and Canada Guaranty. All three of these companies charge the same rates for the insurance.
During the signing of a mortgage, your lender already has the cost of the default insurance worked into the final amount for the mortgage, so you do not have to deal with the insurer. Even when you are completing a purchase plus improvement mortgage, the lender dictates all communication with the insurer.
Start the conversation!
A BVM Contracting Renovation Consultant is uniquely positioned to help you navigate the crazy world of mortgages. To learn more about how we help homeowners with finding the right mortgage for their needs please feel free to contact us. Looking forward to starting a conversation.
ABOUT BVM CONTRACTING
BVM Contracting is a full-service General Contractor or Home Builder located in Toronto. We provide home renovation and building services for major home renovations (kitchen renovations, bathroom renovations, basement renovations, full interior renovations, home additions, and new home construction). Our goal is to help guide our clients through the process of renovating their home, from concept to completion.
Further than providing General Contracting and Project Management for major home renovations, we also offer value-added services such as renovation financing, renovation rebate consultations and services, building permit and design services, smart home installation services, and real estate investor services.
To learn more about our offering by visiting our services page.