Posted by John Doe
If you want to buy a home, but are unable to put down a minimum down payment of 20% then you will need mortgage loan insurance. Mortgage loan insurance will protect your lenders so that they will get their money back in the event that you are unable to pay back the loan. Here, we break down why you should have mortgage loan insurance.
With some corporations, such as the CMHC, you can get a mortgage for up to 95% of the purchase price of the house. Also, even though you will be allowed to put down a smaller down payment than the norm you will still pay reasonable interest rates in the vast majority of cases. The housing market in Canada also becomes stabilized thanks to mortgage loan insurance.
For instance, if the country is going through a serious recession or even an economic slump then people may not be able to save enough to put down a 20% down payment on a home. However, thanks to mortgage loan insurance, the availability of mortgage funding does not become an issue, because in some cases a home buyer will only need to put down a down payment of 5% instead of the usual 20%. Then, once the economy has picked up, the lender will be able to pay back the loan in a reasonable amount of time at a reasonable rate.
The Purchase Price of the Home
The amount you will need to put down will vary on several factors. For instance, if the home you wish to purchase costs under half a million dollars then you will need to make a minimum down payment of only 5%. However, if the home you wish to purchase exceeds the half a million mark then you will need to put down a 5% minimum down payment for the first half a million and an additional 10% down payment on the remainder. Also, please note that if a home costs a million dollars or more then you will not be eligible for mortgage loan insurance given the far greater risk involved.
When it comes to mortgage loan insurance your lender will usually need to pay an insurance premium. Moreover, the premium is calculated as a percentage of the mortgage and is actually based on the down payment that you are able to put down. It should also be noted that in most cases the financial institution that loans you the money will pass these costs over to you. You will then have the option to either add the amount to your monthly mortgage payments or pay it off in one shot via a lump sum payment.
Can Any Dwelling Qualify?
Some people believe that they can only qualify for mortal loan insurance if they want to purchase a conventional single-family home. However, in reality, you can use mortgage loan insurance to make a multitude of different purchases. For instance, mortgage loan insurance can be used to make a down payment on a mobile home, a manufactured home, condos, duplexes, rental homes, and even nursing homes. If you would like to learn more about what kinds of properties you can purchase using mortgage loan insurance then please speak to your prospective lender, as the types of properties eligible may vary from lender to lender.
Energy Efficient Housing
Some financial institutions or lenders will offer a partial refund on the cost of the insurance. As such, if you renovate, build, or buy for energy efficiency some providers will provide a refund of up to 25% on your premium. As can be seen, there are many benefits to having mortgage loan insurance. Not only can it allow you to purchase a home that you would otherwise be unable to purchase due to not having a 20% down payment available, but you can also save on your payments while also helping reduce your carbon footprint.
It should also be noted that while you can avoid paying premiums by opting for mortgage loan insurance you usually have to pay high administration fees as well as higher interest rates. When you factor in the overall savings achieved, mortgage loan insurance is usually a smart choice. The fact that you can save up to 25% on your premiums by renovating or purchasing an energy efficient home further serves as an incentive for those interested in qualifying for mortgage loan insurance.
We hope we have answered some of your questions regarding mortgage loan insurance and why it can help you own the home of your dreams. In some cases, particularly in a trying economy, mortgage loan insurance may be the only option available for Canadians who are struggling financially but would still like to purchase a home for their families.
If you would like to learn more about the advantages of selecting mortgage loan insurance for your financial needs or would like to see if you qualify for it, then please give us a call at your earliest convenience. We can be reached at 1-866-417-8805 if you have any inquiries. We will be more than happy to provide a free, no obligation quote and consultation that is entirely confidential so that you can discuss your unique financial needs and concerns without worry.
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