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Mortgage Insurance: Worth Taking or Not?

mortgage insurance

The average home prices in Ontario are set to rise by 9.2 percent in 2022. In some of the more popular locations, the price hike may be as much as 14 percent to 20 percent over the 2021 prices. In this highly competitive market, driven by economic uncertainties and insufficient affordable housing, buying a home in Ontario will certainly be one of the biggest and most important investments in your lifetime. Remember that if your down payment is less than 20 percent of the purchase price of the property, it is mandatory to buy mortgage loan insurance, which further adds to your mortgage carrying costs. As a first-time homebuyer, if you ask around about “What is mortgage insurance?”, chances are that you may get more than one answer due to the different types of mortgage insurance products on the market today.

Trust the expert mortgage insurance brokers near you at Orr & Associates. Our team has useful insights into mortgage insurance options, and whether it is worth taking one.

Types of Mortgage Insurance and When Should You Get One

  • Mortgage Default Insurance: Also known as mortgage loan insurance, this type of insurance protects your lender in the event you default on your mortgage and is mandatory for those who make a down payment of less than 20 percent of the house purchase price. Besides the Canadian Mortgage and Housing Corporation (CMHC), who is the market leader in this space, mortgage default insurance is also available through Genworth Financial or Canada Guaranty. The lender calculates the premium on the basis of your loan to value ratio (based on the down payment), with the typical premium ranging from 0.6 percent to 4.5 percent.
  • Mortgage Protection Insurance: This type of insurance pays off the remaining balance of your mortgage in the event of your death. However, this is a declining payout type of policy. Essentially, you start out paying the premiums for covering your entire mortgage, but as you pay down your mortgage, your coverage benefit goes down, while the monthly premium remains the same. Remember, mortgage protection insurance covers only your mortgage and pays out the covered sum directly to your lender.
  • Other Mortgage Insurance Products: If you are looking for mortgage insurance that provides financial support to your beneficiaries in the event of your death or incapacitation, you may have to look at life insurance, disability insurance, or critical illness insurance policies. These policies will not only help pay out the balance of your mortgage, but also provide money to your dependents or loved ones. In fact, depending on your age, health and a few other variables, the premiums for these policies may even be cheaper than the other pure mortgage insurance products.

Consult an Experienced Mortgage Insurance Broker Near You

Buying a home with a smaller down payment and larger mortgage always comes with risks, especially if there is a chance that:

  • You may be unable to make your monthly mortgage payments due to a critical illness or injury that prevents you from working, or in case you pass away.
  • Volatile housing markets and uncertain economic conditions that lead to the value of your home falling below the balance amount you owe on your mortgage.

At Orr & Associates, we can help you review your financials and advise you on the mortgage insurance policies that best meet your current and future needs. Our expert mortgage insurance brokers stay abreast of the industry trends and products and ensure access to the top insurance companies in Canada.

Looking for a mortgage insurance broker in or around the York or Simcoe regions of Ontario? Call 1 (866) 521 5926 toll-free to speak to one of our experienced consultants or contact us online to request a free quote.