Mortgage Insurance is Not Just for High Ratio Loans

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Though mortgage default insurance is required in Canada on loans where 80 per cent or greater of the property’s value is financed though a lender, that is not the only case when it is beneficial to obtain insurance.

According to the Canada Mortgage and Housing Corporation (CMHC), as of December 31, 2009, 71 per cent of their $472-billion in outstanding mortgage insurance was for mortgages with a loan-to-value (LTV) ratio of 80 per cent or less. Fewer than five per cent of insured mortgages were for loans with an LTV over 95 per cent, and almost 90 per cent of insured mortgagors had already amassed at least 10 per cent in equity in their home.

Mortgage insurance protects the lender in the event the mortgagor defaults on their mortgage payments. It allows lenders more comfort in lending large amounts, or high LTVs, to mortgagors, and can also affect the interest rates mortgagors are offered. Having your mortgage insured often means access to lower rates.

Canadian mortgagors also have option to take out a Mortgage Life Insurance policy. This insurance allows the mortgagor to select a beneficiary in the event of their passing, protecting their mortgage for loved ones. Term Life is the most popular of this type of insurance, and can be secured in terms and/or converted to other policy forms better suited to one’s insurance needs at the various stages of their lives.

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