Mortgage Loan Insurance

What is Mortgage Loan Insurance?

Mortgage lending involves some degree of risk for lenders. This is why mortgage loan insurance exists. It provides mortgage lenders with a guarantee of repayment and eliminates the risk mortgage lenders take when they make mortgage loans. It therefore protects mortgage lenders against loss due to default on the loan. That means lenders will be more confident in making mortgage loans, allowing more loans to more people to buy more homes.

When Do You Need Mortgage Loan Insurance?

You need mortgage loan insurance when you borrow more than 75% of the purchase price of a home. This is called a high ratio mortgage loan. As a homebuyer you can:

• Get an uninsured first mortgage loan for up to 75% of the purchase price plus secondary financing to complete your borrowing.
  
  
• Get an insured mortgage loan for up to 95% of the purchase price.

What Does This Insurance provide?

Mortgage loan insurance makes it easier for you to buy a home by making it easier for you to get a mortgage. It allows you to afford your dream home sooner since your down payment can be as low as 5% of the purchase price. In addition, because your down payment is smaller than it otherwise would be, mortgage loan insurance leaves more funds available for new home necessities, such as drapes, appliances, furniture and so on.

How Much Is Mortgage Loan Insurance?

The mortgage loan insurance premium is based on the size of your loan and may be added to your mortgage loan. The following table shows the amount of the premium based on the loan size as a percentage of the purchase price. The premium is calculates on the loan amount not the purchase price.

For information about mortgage insurance, or if you have any questions about mortgages contact us anytime including evenings or weekends.

For more information go to: CMHC National