What is Mortgage Loan Insurance?

If you are a first time home buyer, you may be wondering about Mortgage Loan insurance and if it will apply to you.

Mortgage insurance is required by the mortgage lender to protect the mortgage lender if, for any reason, the borrower cannot pay their mortgage. The cost of obtaining this insurance is passed on to the consumer.

If your downpayment is less than 20% you Mortgage loan insurance will be required. There are some instances where the lenders will want to insure your mortgage even if your downpayment is less than 20%. This usually depends on the risk associated with the financing. The three main mortgage insurers in Canada are CMHC, Genworth and AIG United Guaranty.

Here is an example of how an insurance premium is calculated for a buyer with a 10% downpayment:


Purchase Price: $300,000 (A)
10% saved downpayment: $30,000 (B)

Price less downpayment (A)-(B) $270,000 (C)

Mortgage Loan Insurance Premium: $5,400 (D)
**2% of (C) $270,000

Total Mortgage Amount: $275,400

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**Please note that the mortgage loan insurance premium is subject to provincial sales tax. This amount cannot be included in your total loan amount and you will have to pay it at time of closing.
(using the example above, with a premium of $5,400, 8% PST = $432)

Here are the typical mortgage insurance premiums based on the financing required on the purchase:

Financing Required Premium
Up to and including 65% 0.50%
Up to and including 75% 0.65%
Up to and including 80% 1.00%
Up to and including 85% 1.75%
Up to and including 90% 2.00%
Up to and including 95% 2.75%


CINDY MASON
MORTGAGE AGENT,
FSCO LIC.# MO8004144
MORCAN FINANCIAL INC.
Tel. 1-800-441-5425 ext. 1
Cel. 1-800-441-5425 ext. 2
Fax. 905-852-1379
cmason@morcan.ca