Mortgage Insurance: What is it??

There are 2 main types of Mortgage Insurance – but they are very different products. One protects YOU (the borrower) and one protect the BANK (the lender). Therefore, it is very important to distinguish between them.

Mortgage Insurance (aka CMHC, Genworth, Canada Guaranty)

This is the type of insurance that protects the bank. This Mortgage Insurance is mandated by the Canadian Government when any mortgagor puts less than 20% down on a home. When you put less than 20% down on a home, it is known as a “high ratio mortgage”. Generally in this case, the banks will pay for this Mortgage Insurance to protect themselves. But again, this is mandatory. This usually entitles the mortgagor to excellent mortgage rates because as we all know, mortgage rates fluctuate based on risk. There is little to no risk for the bank in this case so they provide great rates. These are usually the rates that are quoted online to catch peoples’ interest.

Sometimes the bank will buy this Mortgage Insurance even when the mortgagor is putting more than 20% down. This generally also equates to less risk and better rates. BUT, in these cases, sometimes the bank pass the cost of the insurance premium (which can be in the thousands) onto the client. So be careful of that and check for hidden costs.

Mortgage Protection Insurance

This is the type of Mortgage Insurance that protects the homeowner. This is something that we as mortgage brokers are mandated to offer to our clients. They can choose to accept it or not, but it must be offered. Mortgage Protection Insurance protects the borrower by covering the payments of the mortgage in case of a disability and/or pays off the mortgage in case of death. Essentially, this Mortgage Insurance is a type of life or disability insurance. The premiums for mortgage protection insurance are reasonable (especially if you are young)! If you accept it, the payment comes out monthly, separate from your mortgage payments. There are other life and disability insurance policies out there that are not tied to your mortgage, but what is nice about mortgage protection insurance is that it is portable. That means it is in effect for the length of your mortgage, as long as you make your payments, and it moves around with you, even if you move or change lenders.

I would invite you to check the video below for an overview.

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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