what is an insured mortgage

An insured mortgage is a type of mortgage insurance that protects the lender in the event that the borrower defaults on their loan. This type of insurance is typically required by lenders when the borrower has a down payment of less than 20% of the home’s purchase price. Mortgage insurance can either be paid upfront by the borrower or can be added to the monthly mortgage payment.

Mortgage-backed securities and CMHC Guarantee Fees

In order to provide some stability for lenders during times of economic turmoil, the Canadian government offers a mortgage-backed securities program. This program allows lenders to pool together their mortgages and then sell them as bonds. The proceeds from the sale of these bonds can then be used to issue new loans or cover losses on existing loans.

The Canadian Mortgage Housing Corporation (CMHC) is the Crown corporation that administers this program. As a part of this program, CMHC also insures these bonds against default. In order to encourage lenders to participate in this program, CMHC charges a guarantee fee. This fee is typically passed on to the borrower and is added to the mortgage balance.

How does this affect me?

The main benefit of an insured mortgage is that it allows borrowers to purchase a home with a smaller down payment. This can be helpful for first-time home buyers or those who may not have the savings for a larger down payment.

It is important to note that, while an insured mortgage may provide some protection for the lender, it does not protect the borrower in the event of a default. Borrowers should be aware of this and should plan accordingly in case they are unable to make their mortgage payments.

What are the differences between insured and non insured mortgages

The main difference between an insured and non-insured mortgage is the amount of the down payment. For an insured mortgage, the borrower is only required to put down a minimum of 5% of the home’s purchase price, while for a non-insured mortgage the borrower would need to put down at least 20%.

Another difference is that, in the event of a default, the lender is protected by the mortgage insurance policy in an insured mortgage. In a non-insured mortgage, the borrower is solely responsible for any losses suffered by the lender.

Does mortgage insurance protect me?

Mortgage insurance does not protect the borrower in the event of a default. The main purpose of mortgage insurance is to protect the lender.

Borrowers should be aware that they are still responsible for the full amount of the loan, even if they have mortgage insurance. In the event that you are unable to make your mortgage payments, the mortgage insurance policy will not cover your losses.

It is important to remember that, while mortgage insurance can provide some protection for the lender, it does not replace the need for borrowers to maintain their own financial stability. Borrowers should always plan ahead and be prepared in case they are unable to make their mortgage payments.

Transactional insurance vs Portfolio insurance

There are two main types of mortgage insurance: transactional insurance and portfolio insurance.

Transactional insurance is designed to protect the lender in the event that a borrower defaults on their loan. This type of insurance is typically required by lenders when the borrower has a down payment of less than 20% of the home’s purchase price.

Portfolio insurance is designed to protect the lender’s portfolio of loans in the event of a market downturn. This type of insurance is typically required by lenders when the borrower has a down payment of more than 20% of the home’s purchase price.

Which type of mortgage insurance is right for me?

The type of mortgage insurance that you will need will depend on the down payment that you have and the type of loan that you are applying for.

If you have a down payment of less than 20% of the home’s purchase price, you will likely need to get transactional insurance. If you have a down payment of more than 20% of the home’s purchase price, you may be able to get portfolio insurance.

If you are not sure which mortgage insurance you need, contact us today and we’ll have an expert talk to you about which mortgage insurance is best for you.

What are the premiums for mortgage insurance?

The premium for mortgage insurance depends on a number of factors, including the amount of the loan, the down payment, and the type of loan.

For example, the premium for a $200,000 loan with a 5% down payment and a 30-year term would be much lower than the premium for a $200,000 loan with a 3% down payment and a 5-year term.

*Bonus Tip

What is private mortgage insurance?

Private mortgage insurance (PMI) is insurance that protects the lender in the event that the borrower defaults on their loan. PMI is typically required when the borrower has a down payment of less than 20% of the home’s purchase price.

The amount you pay for PMI varies depending on the factors below, including how much money you’re borrowing, how large of a down payment you’ve made, and what type of loan it is.

  • Loan amount
  • Down payment size
  • Type of loan

If you are required to pay PMI, it is important to remember that you are still responsible for the full amount of the loan. In the event that you are unable to make your mortgage payments, the PMI policy will not cover your losses.

How Integrum Mortgage can help you with an insured and non insured mortgage

At Integrum Mortgage, we are committed to helping you find the right mortgage solution for your needs. We offer a variety of mortgage products, including insured and non insured mortgages.

If you are interested in learning more about our mortgage products, contact us today and one of our experts will be happy to talk to you about your options.