1. This type of insurance protects the lender against default and not the homeowner. Mortgage insurance is designed to ensure the lender is able to recoup costs should you default on your loan.
2. Mortgage insurance is mandatory for borrowers who can only come up with a down payment for their home of less than 20% of the total. Furthermore, down payments cannot be less than 5%.
3. The cost of mortgage insurance depends on the type of loan you’ve applied for and the amount of your down payment.
4. Mortgage insurance is not the same as homeowner insurance. Homeowner insurance is put in place to protect your home and possessions against damages such as fire, theft, etc. Also, mortgage life insurance is different than mortgage insurance. Mortgage life insurance in designed to repay any outstanding mortgage payments should the homeowner find themselves on long-term disability or in the event of death.
5. Insurance has nothing to do with getting you a low mortgage rate. To get a low mortgage rate you need good credit and a good mortgage broker because he or she will shop around for you to find a low rate. However, having mortgage insurance doesn’t hurt your chances of getting a low mortgage rate.
6. There are only three places you can get mortgage insurance in Canada: CMHC, Genworth Financial and Canada Guarantee. Any other place offering mortgage insurance is a scam.
7. Mortgage insurance costs the homebuyer 2.80%-4.00% of the total mortgage amount, but it does allow you to purchase a home with a lower down payment.
8. You don’t have to pay the premium on mortgage insurance up front. The cost gets lumped in with your mortgage payments.
The best way to learn about mortgage insurance is to talk to your mortgage broker. While you’re at it, you can inquire about getting a low mortgage rate.
source: northwoodmortgage.com
