If you are buying a home with all cash, or paying at least 20% of the price upfront
this article is not for you...
Mortgage loan insurance is typically required by lenders (banks, etc) when homebuyers make a downpayment of less than 20% of the purchase price. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with little or no downpayment — with interest rates comparable to those with a 20% downpayment.
As with any insurance, there are insurance premiums to be paid. The amount of the premium varies and can range between 0.65% and 2.75% depending upon how much of the purchase price/home value is financed with a mortgage loan.
Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.
There are two major companies that provide Mortgage Insurance; CMHC and GE (Genworth)
The following table describes how much mortgage insurance will be involved (based on 25-years amortization period)
| Loan-to-Value-Ratio |
|
|
Premium |
|
|
|
|
| Upto and including 80% |
|
|
0.00% |
| Upto and including 85% |
|
|
1.50% |
| Upto and including 90% |
|
|
2.00% |
| Upto and including 95% |
|
|
3.25% |
| Upto and including 100% |
|
|
3.40% |
The good thing is that this premium is charged ONE-TIME only, and you don't need to come up with money your lender (bank) will pay this to the mortgage company at the time of closing and will add it to your overall mortgage loan.
If you are planning to go for a longer than 25-years amortization period for more affordability, the premium will be a little more.
If you are wondering how much exactly would your "monthly" installement would be on a certain home, you can ask us for a more accurate calculation WITHOUT ANY CHARGE to you.
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