Mortgage insurance is an important part of the home buying process in Canada. It protects lenders from defaulted loans and provides borrowers with the opportunity to purchase a home with a down payment of less than 20%. It’s important to understand the different types of mortgage insurance and how they work in order to make an informed decision.
The most popular type of mortgage insurance in Canada is CMHC (Canada Mortgage and Housing Corporation) insurance. This type of insurance is provided by the government and protects lenders against defaulted loans. It is typically required for down payments of less than 20%. The cost of CMHC insurance is based on a percentage of the loan amount and is paid for by the borrower.
Another type of mortgage insurance is lender insurance. This is offered by private mortgage insurers and is typically required for down payments of less than 20%. The cost of lender insurance is typically lower than CMHC insurance and can be paid for by either the borrower or the lender.
Lastly, there is mortgage life insurance. This type of insurance is not required but can be very beneficial. It provides a payout to the lender in the event of the borrower’s death. This can provide added peace of mind to both parties.
When considering mortgage insurance, it’s important to understand the differences between the different types of insurance available in Canada. Each type has its own advantages and disadvantages, and it’s important to understand how they work in order to make an informed decision. With the right information, you can make the best choice for your situation and ensure that you are properly protected.