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Insurance for mortgages

For most Canadians, the hardest thing about buying a home – especially the first home – is saving the necessary down payment. Conventional mortgage financing which requires a 20% down payment can put home ownership out of reach for most Canadians.

Fortunately, real relief came in 1954 when the government introduced significant changes to both the National Housing Act and the Bank Act which would increase the supply of mortgage funds available. By providing default insurance to financial institutions, also know as mortgage loan insurance, home buyers today can arrange financing up to 100% of the property’s value. Lenders refer to this as a 100% Loan-To-Value Ratio (LTV). Hence, any financing beyond the conventional 80%, which requires default insurance, is referred to as, high-ratio financing.

Mortgage default insurance is a mandatory premium lenders place on mortgages with a LTV higher than 80%.

There are 2 main Mortgage Insurers in Canada that allow Canadians the dream of Home Ownership.

CMHC is Canada's largest default mortgage insurer. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with as little as 5% down payment

Genworth is an equal to the above two insurers. If you are purchasing or refinancing a home with a home with a LTV of 80% or more, the mortgage must be insured. This insurance protects the lender against borrower default, and enables them to give you mortgage financing for the purchase of a home with a small down payment.

These amounts are based on a 25 year amortization period and a surcharge of .20% added to the premium for a 30 year amortization.

The amounts of the premium is added to the net mortgage amount and new payment will include the premium factored in.

NTDP*** is Non Traditional Down Payment. See Flex Down Payment or Free Down Payment.