Mortgage Insurance: Canada Offers You A Choice

Posted September 18, 2010 – 4:28 am in: Mortgages
     

If you are looking to purchase a home but cannot afford the down payment, the Canadian housing finance system has made it possible. You are able to get a mortgage with a 5% down payment on your residence, but will be able to get a 20% interest rate.

How could this be? This is granted by buying loan insurance for the amount borrowed on the loan. Risk of the loan defaulting is reduced for the mortgage company and the buyer will be able to buy a property without making the whole down payment.

Who Qualifies?

However, not everyone will be able to get loan insurance; there are some requirements to qualify.

To qualify, the home, of course, must be in Canada. For single-family and two-unit homes, you must have a down payment with a minimum of 5%, and at least 10% on three- or four-unit homes. The down payment needs to come from your own resources, but it is acceptable for an immediate relative to contribution you the money.

Also, the total monthly housing costs that include principle, interest, property taxes, heat, the annual site lease in case of household tenure, and 50% of applicable condominium fees should not represent in excess of 32% of your gross household income.

Also, to qualify for the loan insurance, your liability load should not be more than 40% of your gross household earnings.

The amount of closing expenses and fees also can play a roll in deciding your eligibility for mortgage insurance.

So, what’s the price?

The broker pays the insurance premium to obtain loan insurance. The expense will get passed on to you, but it is the mortgage company who pays the initial insurance premium.

So, how much is loan insurance? Well, the response varies. The price of the insurance and the amount of the loan are directly connected. The more youre lended, the more insurance will be. This rewards those who set aside to put money down.

They even give you options on how to pay the insurance premium. You can bind the insurance premiums into your mortgage and pay them monthly or pay them up front in a lump sum.

You are not safe just because you purchased loan insurance if your loan is defaulted. The broker is just insured on the borrowed amount. On the plus side, it lets you buy a residence you were not otherwise in a position to purchase.

Save on loan insurance by going to www.infoprimes.com.

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