When it comes to mortgages, insurance is necessary to protect the lender on these types of loans, which deal in large sums of money. There are three different tiers relating to insurance, which all have different minimum down payment amounts and varying premium insurance fees.
1. Insured mortgages typically have a less than 20% down payment and are insured with mortgage default insurance through one of Canada’s mortgage insurers: CMHC, Sagen or Canada Guaranty. In these cases, the premium is based on a percentage of the loan amount, which is added to the mortgage and paid monthly.
2. Insurable mortgages typically have a 20% or higher down payment and do not require mortgage insurance, though they can qualify for it. In these cases, the homeowner wouldn’t have to pay an insurance premium, but the lender can if they choose to.
3. Uninsurable mortgages do not meet mortgage insurer requirements; some examples of these types of mortgages can include: refinances, mortgages with an amortization longer than 25-years or mortgage files where the real estate is more than $1M in value and/or purchase price. No insurance premium required.
While insured and insurable mortgages are more common and typically more cost-effective when it comes to lending money, therefore clients who opt for these mortgages often get better rates.
When it comes to an uninsurable mortgage, this means that the lender is providing their own funds to the client without the protection of insurance, and have to commit to the loan for the entire term. Due to this, uninsurable mortgages tend to have higher interest rates as they are a higher risk loan.
Typically, uninsurable mortgages require a minimum of 20% down on the loan and are available for up to 30-year amortization. These loans can have greater flexibility with some lenders when it comes to debt servicing ratios and qualification.
Getting a mortgage today is not a one size fits all process. What you qualify for will be unique to you and the details of your situation.
If you are looking for a broker who strategically knows how to get the most for their clients, reach out to us and let us walk you through the mortgage journey.
Written by the DLC Marketing Team
