Mortgage Insurance Calculator
Any home loan borrower should know that mortgage is just one of the costs to pay in owning a house. Aside from land transfer taxes and other finance charges, you should also keep in mind your mortgage insurance, especially if you’re paying less than 20% the value of the home. Use this calculator to help you.
What is a mortgage default insurance?
Also referred to as mortgage insurance, a mortgage default insurance acts as protection for lenders, such as banks, from defaults or non-payment of mortgage for three consecutive months. This means that lenders can avoid potential huge losses due to the non-payment.
This type of insurance isn’t applicable to all home loan borrowers. It is mandatory only if the mortgage is considered as high ratio or when the down payment falls below 20% of the property price, as well as for homes that are worth over $ 1 million since 20% down payment is required. It bears a premium as low as 1.80% to as high as 3.5% of the value of the mortgage.
Who offers mortgage default insurance in Canada?
While banks provide the mortgage, the mortgage default insurance is offered by other entities. In Canada, there are three known providers. These are Genworth Financial, Canada Guaranty, and CMHC SCHL (Canada Mortgage and Housing Corporation). While the first two are private mortgage insurance providers, the third one is public. These three tend to offer similar products, but they also differ in a number of ways. This may then explain why you cannot be insured by one but be covered by the others.
How to reduce your mortgage default insurance payments?
First, you need to strive to pay at least 20% of the down payment of your mortgage. This may be too much especially for first-time homebuyers; thus, you have another option, which is to buy a much cheaper home. You can also talk with your lender about cancelling the mortgage insurance once you’ve already paid at least 80% of the mortgage balance, as well as increase your credit score for more favorable terms of your insurance.
CMHC vs. Canada Guaranty vs. Genworth
CMHC is government owned and offers premium on total loan between 0.60% for up to 65% loan-to-value ratio and 3.85% for a non-traditional payment or 90% to 95% LTV. Premium increase may be from 0.60% to 5.65% It provides at most 25% refund if the purchased home is energy efficient. Coming in second in terms of size is Genworth, a private insurance provider, which offers a wide range of products such as Homebuyer 95 that insures property with only 5% down payment. The third biggest insurance provider is Canada Guaranty, which can insurance owner-occupied properties with 1 or 2 units with an LTV of 95%.
Can I choose my mortgage default insurance company?
Yes, you can. These companies have brokers to help you understand their different products. However, if you want less hassle, you can work directly with your bank, which usually has a partnership with any or all of these insurance providers. Insurance premiums will be part of your mortgage costs. Do know you’re entitled to request for another insurance provider if the odds may not be initially in your favor. Remember, you will pay for the insurance premium, so you better make sure you’re getting your money’s worth.
Canadian Mortgage Insurance Calculator
Find out how much you can save by increasing your down payment and how much mortgage insurance you will pay.
The first step in buying a home is to ensure you can afford to pay at least 5% of the purchase price of the home as a down payment and determining your budget. Our CompareMyRates.ca calculator will step you through the process of finding out how much you can borrow. The amount of your mortgage or mortgage default insurance is based on the property price of your home and the down payment. Use the CMHC Calculator our side by side comparison scenario how much of a down payment is required and how much you save should you increase your down payment.
Established as a government-owned corporation in 1946, Canada Mortgage and Housing Corporation (CMHC) is Canada’s national housing agency. CMHC is Canada’s premier provider of mortgage loan insurance, mortgage-backed securities, housing policy and programs, and housing research. Their mission is to meet or exceed client expectations through quality service and world class products.
Find out how much you will pay in mortgage insurance with CompareMyRates.ca. There are 3 Mortgage Default Insurers in Canada; Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada and Canada Guaranty (formerly AIG United Guaranty). Mortgage Default Insurance, commonly known as Mortgage Insurance, is required by Federal law for borrowers if their down payment less than 20% of the value of the property. Also, as a condition for obtaining a mortgage, a financial institution requires two kinds of insurance, mortgage default insurance and property insurance.