Kevin Smith - First Choice Mortgage and Loans

Mortgage Loan Insurance

When you need a mortgage loan that is more than 75% of the purchase price of your home, mortgage loan insurance may be required. This protects the lender and, by law, most Canadian lending institutions require it.

Having mortgage loan insurance means that if you, the borrower, default on your mortgage, the lender is paid back by the insurer. With the risk of losing their money removed, lenders have the confidence to make mortgage loans of up to 95% of the purchase price of the home (subject to price ceilings).
With mortgage loan insurance, many Canadians who might be unable to obtain a 25% down payment can still buy a home.

What does mortgage loan insurance cost?
There are two components: an application fee and an insurance premium. The application fee typically ranges from $75 to $235, and mortgage loan insurance premiums range from .5% to 3.25% of the amount of your loan, depending on the size of the loan and the value of your home. Additional charges may also apply. The premium can be added to your mortgage loan and paid off as part of your regular mortgage payments, or paid off in a lump sum at the time of purchase to save interest charges on the premium itself.

Are there any requirments I must meet in order to obtain mortgage loan insurance?
Both new and resale homes are eligible, but there are some criteria that must be met, including:

The home must be in Canada, and must be your principal residence
Housing payments, including principal, interest, property taxes, heating (P.I.T.H.), the annual site lease in the case of leasehold tenure, and 50% of applicable condominum fees, cannot be more than 32% of your gross household income (GDS ratio).
Your total debt load cannot be more than 40% of your gross household income (TDS ratio).

Other criteria apply, and are subject to change. Please contact me if you are interested in finding out more.