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Yes. Mortgage life insurance is a life insurance policy on a homeowner, which will allow your family or dependents to pay off the mortgage on the home should something tragic happen to you. Mortgage default insurance is something lenders require you to purchase to cover their own assets if you have less than a 20% down payment. Mortgage life insurance is meant to protect the family of a homeowner and not the mortgage lender itself. We strongly suggest mortgage insurance to help cover the affects of the unexpected. Talk to your Mortgage Broker regarding the best options for you!
Mortgage insurance allows home buyer to put as little as 5% down. So if your downpayment is less than 20% of the purchase price, you will be required to purchase mortgage insurance through your lender. Mortgage insurance protects your lender against payment default. Mortgage insurance premiums are calculated based on the amount of your downpayment. For instance, if your downpayment is 5%, premium on the total loan amount will be 2.75%. In other words, if your loan amount less 5% of the downpayment is $100,000, your CMHC or GE insurance will be $2,750. Homebuyers can either pay this amount upfront, or add it to their mortgage.
If your mortgage is insured (or in other words high-ratio), CMHC or GE wants to make sure that other than your downpayment, you have funds saved for expenses associated with purchase and moving to your new home. This amount is calculated by CMHC as 1.5% of your original loan amount. If the sale price is $100,000 and you are putting 5% down, you will need to have $6,500 saved ($5,000 for the downpayment and $1,500 for moving expenses). For more information, please visit the CMHC Website