Hi everyone. How are you? It’s Leah Coss with The Mortgage Centre and I wanted to come out on this fabulously rainy day here to chat with you about mortgage insurance. And I wanted to just quickly describe the two different types. If you want more depths on each one, go to my blog, MortgagesInVancouver.com or LeahCoss.ca and that’ll go the specifics of both insurances. But I wanted to make sure that you understand there’s two types of insurance out there that is mortgage insurance.
One of them is a type of mortgage insurance that you need before you get the home and in order to qualify to even get the home and to get the mortgage.
The other mortgage insurance is where you get afterwards. Once you have the home, once you have the mortgage and it’s something that’s the typical mortgage which ensures you in case something happens.
The first mortgage insurance is something that ensures the banks.
So I’ll just quickly describe each one and like I said, if you want more, in depth information, just go to my blog. You’ll find a video on each one.
But the first one is CMHC insurance which is what a lot of people will call it. But there’s also Genworth insurance as well as AIG insurance. This insurance is meant to protect the banks and your lender, not you.
So it’s very important that you understand that. There’s my doggie in the background. So with the mortgage insurance, this is something that some lenders are called bulk insurers. That means that no matter what the deal is, they’re going to insure it no matter what.
You could book 50 percent down, they’re still going to insure it. Because they insure all deals. That’s what a bulk insurer is. Then there’s a lot of other lenders who only insure unconventional deals.
Conventional means that you’ve go 20 percent as a down payment or 20 percent equity in the home, if you’re refinancing. And in that case, with these specific lenders, you do not need CMHC, AIG or Genworth mortgage insurance.
If you’re putting less than that, five percent down, 10 percent down, 15 percent down, 12 percent down, 18 percent down, even 19.99 percent down, you are going to need mortgage insurance.
So how does this affect you and what does it do. Well, it safeguards the banks in case you go into default. For example, CMHC, they give a 100 percent back to the banks. Genworth gives 90 percent. AIG, nobody really uses them. So it doesn’t matter.
But they insure the banks if you default. But you have to pay the premiums. Fun, huh? Now the only times you don’t have to pay the premiums is if you are putting more than 20 percent down and you go with a bulk insurer.
In that case, the lender will take a bite on those premiums. But it’s also because it’s not that much.
But how it works is depending on your amortization period and depending on how much your mortgage is, is what’s going to determine how much of a mortgage insurance or CMHC insurance that you’re going to have to pay for your home.
So that’s just a quick blurb on that. There’s a lot more to know but check on my website if you want more information.
This second mortgage information is what you get afterwards. So like any insurance that you would get, this is here to protect you in case something bad happens, that is unforeseen.
In this case what it’s going to do is pay your mortgage payments. I don’t like mortgage insurance. I myself am supposed to sell it. I get a lot of pressure to sell it as a mortgage broker.
But I believe that I’m supposed to look out for my clients’ best interests and I don’t actually believe that mortgage insurance is the best interest for them.
I believe that critical illness insurance or life insurance is much better. Why? Because mortgage insurance takes a decline over time. Because your mortgage balance declines. But your payments in life don’t.
So if you get injured, mortgage insurance will only cover your mortgage if you get critical illness and you get sick.
It’s going to cover your mortgage payments. It’s going to cover you cell phone bill. It’s going to cover your hydro. It’s going to cover all of those other things that you need in life.
So again, if you want to know more about that go to my blog. As well, I can refer you to some great insurance brokers. Because again, I don’t like to sell the insurance. I push that on to someone who specializes in that field.
So there’s the two differences. One insurance insures you. The other one insures the banks. One of them you get before you get your mortgage. The other one you get after you get your mortgage.
So if you have any other questions, let me know, Leah Coss, with The Mortgage Centre. My contact info should be somewhere on this site and hopefully, I’ll be talking to you soon.