Mortgage insurance is an important consideration when purchasing a home in Canada, as it is designed to protect both lenders and borrowers in the event that a borrower defaults on the loan. Mortgage insurance offers peace of mind to lenders, who may be reluctant to lend to high-risk borrowers, and it helps borrowers obtain financing they may not otherwise be able to get. There are two primary types of mortgage insurance: private mortgage insurance (PMI) and mortgage default insurance (MDI).
Private Mortgage Insurance (PMI):
Private mortgage insurance is a type of insurance that is purchased by the borrower and is designed to protect the lender if the borrower defaults on the loan. PMI is typically required for borrowers with lower credit scores or who are putting down less than 20% of the value of the home. The cost of PMI is typically paid by the borrower as a one-time fee, which is usually a percentage of the loan amount.
Mortgage Default Insurance (MDI):
Mortgage default insurance is a type of insurance that is purchased by the lender and is designed to protect the lender in the event that the borrower defaults on the loan. MDI is typically required for borrowers with lower credit scores or who are putting down less than 20% of the value of the home. The cost of MDI is usually paid by the borrower as a one-time premium, which is usually a percentage of the loan amount.
High Ratio Mortgage Insurance:
High ratio mortgage insurance is a type of mortgage insurance that is designed to protect the lender if the borrower defaults on the loan. High ratio mortgage insurance is typically required for borrowers with lower credit scores or who are putting down less than 20% of the value of the home. The cost of high ratio mortgage insurance is usually paid by the borrower as a one-time premium, which is usually a percentage of the loan amount.
Portable Mortgage Insurance:
Portable mortgage insurance is a type of mortgage insurance that allows a borrower to transfer their mortgage insurance from one lender to another. This type of mortgage insurance is beneficial for borrowers who are looking to refinance their loan or move to a different lender. The cost of portable mortgage insurance is usually paid by the borrower as a one-time premium, which is usually a percentage of the loan amount.
Mortgage life insurance:
Mortgage life insurance is a type of insurance that pays off the remaining balance of a mortgage if the borrower dies before the loan is paid off. This type of insurance is beneficial for borrowers who are worried about leaving their loved ones with a large debt burden in the event of their death. The cost of mortgage life insurance is usually paid by the borrower as a one-time premium, which is usually a percentage of the loan amount.
Mortgage insurance is an important consideration when purchasing a home in Canada, as it is designed to protect both lenders and borrowers in the event that a borrower defaults on the loan. There are several different types of mortgage insurance available to borrowers, including private mortgage insurance, mortgage default insurance, high ratio mortgage insurance, portable mortgage insurance, and mortgage life insurance. It is important for borrowers to understand the different types of mortgage insurance and how they work in order to make an informed decision about which type is best for them.