Are you familiar with mortgage default insurance?
Do you know whether or not you qualify for it?
Or if you even need it for your Winnipeg mortgage?
Mortgage default insurance was introduced after the depression to help make houses more affordable for Canadians. Originally the mortgage default insurance was offered to veterans of the war to help get access to a house with a lower down payment as the 25% down payment was almost unattainable for someone who was participating in the war and unable to save money. The veterans were able to afford houses at a lower down payment and the bank had compensation if the mortgage defaulted, it was a win-win scenario for those involved. The federal government saw the success of the default insurance and expanded the rules for the default insurance to all Canadians and more houses by the 1970’s.
This introduction of mortgage default insurance changed the landscape of the mortgage industry as more Canadians would be able to afford a home at the lower down payment with less risks to the bank. Mortgage default insurance comes at a price to the borrower but without this insurance many Canadians would not be able to attain a mortgage in Canada.
Whether or not you will be required to obtain mortgage loan insurance will be decided, in large part, by the amount of your down payment. Borrowers who are going to be putting down less than 20% of their loan amount will usually be required by their lender to acquire mortgage loan insurance.
This type of insurance is designed to protect the lender should the borrower become unable or unwilling to pay back their loan and should not be confused with mortgage life insurance, which protects a borrowers dependents in the unfortunate situation of the borrower’s death.
While the borrower will be required to pay an insurance premium in addition to their monthly mortgage payment, obtaining mortgage loan insurance can help borrowers with smaller down payments get approved for the loan they need.
There is still a minimum down payment requirement, which is usually 5% of the loan amount, as well as a limit on the maximum purchase loan amount. There may also be additional requirements borrowers must meet in order to qualify for mortgage loan insurance, and these factors may vary depending on each borrower’s situation.
If you have any questions about down payment or mortgage loan insurance requirements, give me a call today – I am happy to help!