If you are in the market for an Edmonton mortgage, there are a few things you need to be aware of before you can start the home loan process. To begin, you need to know if you have to get mortgage insurance.
What is Mortgage Insurance?
Mortgage insurance, or Canada Mortgage and Housing Corporation (CMHC) insurance, is paid for by the borrower and protects the lender from any default on the mortgage. It is generally required if homeowners cannot make a down payment of at least 20%. For home purchasing, potential buyers can have more affordable options such as making a down payment as low as 5% if they have mortgage insurance.
This also gives Canadians access to the residential market with reasonable mortgage rates that would otherwise be unobtainable without the insurance. Your local Edmonton mortgage broker will be more likely to work with you and offer you competitive rates due to the comfortability of knowing they will be protected.
How to Get Mortgage Insurance?
If you are purchasing a home that is worth over $1 million, you will not be able to qualify for this insurance. The price of mortgage insurance varies depending on how much is paid towards a down payment and the type of home loan you are applying for. This can be provided by three different financial institutions: the Canada Mortgage and Housing Corporation, Genworth Financial, and the Canada Guaranty.
Other types of Insurance?
Mortgage insurance benefits the lender if you make a default on your payments, but it does not protect you. It is common for Canadians to mistake mortgage insurance with mortgage life insurance, which are two separate coverages. Mortgage life insurance will protect your family from taking on the financial responsibility if the homeowner were to be diagnosed with a long-term disability or death.
Another similar type of insurance that is commonly mistaken for is homeowner insurance. This is a type of insurance that directly protects you from any damage or theft your home may face.
It is important to be aware of the different types of coverage out there. Be organised with your finances and research which insurance options you require or would better serve you.
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