Mortgage Insurance is not the same as mortgage life insurance. In Canada, any mortgage must be insured if less than 20% of the value of the property is put in as downpayment. Sometimes a lender will request this insurance if the client is putting down more than 20%, but that's rare. This insurance protects the lender if the mortgagee defaults on the payments and the property goes into foreclosure. The logic behind this insurance is that there will not be enough equity in the property for the bank to recover its money should they need to sell the property after they foreclose.
There are three companies that provide mortgage insurance: Canada Mortgage and Housing (CMHC), AIG, and Genworth (GE). Each offer different programs; it's our job to know which product is the best for our clients.
The cost of this insurance is added to your mortgage amount. You need not come up with the money up front. It is pro-rated, depending on how much you put in as downpayment.
A 10% premium refund and extended amortization period without surcharge may be available when CMHC Mortgage Loan Insurance is used to finance an Energy-Efficient Homes.
As you can see, the more you put down, the cheaper the cost of the insurance.
| Loan-to-Value | Premium on Total Loan | Premium on Increase to Loan Amount for Portability and Refinance | ||
|---|---|---|---|---|
| Standard Premium | Self-Employed without 3rd Party Income Validation | Standard Premium | Self-Employed without 3rd Party Income Validation** | |
| Up to and including 65% | 0.50% | 0.80% | 0.50% | 1.50% |
| Up to and including 75% | 0.65% | 1.00% | 2.25% | 2.60% |
| Up to and including 80% | 1.00% | 1.64% | 2.75% | 3.85% |
| Up to and including 85% | 1.75% | 2.90% | 3.50% | 5.50% |
| Up to and including 90% | 2.00% | 4.75% | 4.25% | 7.00% |
| Up to and including 95% | 2.75% | 6.00% | 4.25%* | * |
| 90.01% to 95% — Non-Traditional Down Payment*** |
2.90% | N/A | * | N/A |
| Extended Amortization Surcharges - Greater than 25 years, up to and including 30 years: 0.20% Greater than 30 years, up to and including 35 years: 0.40% |
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