What’s the difference between mortgage life insurance, mortgage loan insurance or mortgage default insurance? These terms all seem quite similar and are sometimes used interchangeably to add further confusion to things. These various types of coverage are very different and offer unique benefits to Canadian homeowners. Mortgage loan insurance or mortgage default insurance is typically required by lenders when you are buying a home or looking for mortgage refinancing and have less than a 20% down payment based on the property’s value. Mortgage life insurance, on the other hand, is a life insurance policy that pays out a lump sum upon your death to cover the rest of your mortgage. You can view more details in our Canadian Mortgage Life Insurance article.
Mortgage loan insurance is supplied by the Canadian Mortgage and Housing Corporation (CMHC), which is a government organization and private insurers including Genworth Financial and AIG United Guaranty, and helps protects lenders against mortgage default. It’s estimated that about 50% of mortgages taken out in Canada need to be insured. It enables consumers to purchase homes with little or no down payment with interest rates comparable to those with a 20% down payment while providing additional protection to lenders for their added risk. As with all types of insurance, there are premium payments that need to paid for the coverage. The CMHC premiums vary from 0.50% - 2.90% and dependS on the loan-to-value (LTV) ratio of the down payment.
Tags: General, Business, Family, Financial, Homes, Insurance, Credit, Marketing