5 benefits of mortgage insurance

Genworth Financial Canada and other mortgage insurance providers have helped millions of Canadians achieve the dream of homeownership through the help of mortgage insurance. Without it, rates would be higher as the risk of default would increase.

Mortgage insurance is a policy that helps protect the mortgage lender in the event the borrower defaults on their payments. It also provides protection if the borrower is unable to meet the financial obligations of their mortgage. Borrowers that have between a five per cent down payment and 19.99 per cent down payment, also known as high-ratio mortgages, must have it to help protect the lenders. It gives borrowers many perks when buying a home, such as allowing them to have more flexible financing options and lower down payments.

Flexible payment options

You can pay for mortgage insurance in a few different ways. This allows borrowers more flexibility in their payments. It costs homebuyers between 2.80 per cent and 4.00 per cent, depending on how big their down payment is. Home buyers commonly add the expense of mortgage insurance to their mortgage amount. They pay it over the length of the mortgage. This means that you can expect monthly payments to be a little higher. The other option for borrowers with mortgage insurance is to pay it in a lump sum upon the closing of the mortgage.

Allows borrowers access to housing market more quickly

Mortgage insurance also allows borrowers to have quicker access to the housing market. For some borrowers, it would take them years to save up enough money for a 20 per cent down payment. Mortgage insurance allows borrowers the ability to get a mortgage for as little as a five per cent down payment. This means that home buyers don’t have to save up as much money when looking to buy a house. It also provides quicker access to the housing market. Borrowers must keep in mind that the percentage of mortgage insurance they must have will be higher. It will also increase their monthly payments.

Flexibility through affordable premiums

For borrowers that have high-ratio mortgages, having mortgage insurance allows them to still qualify for affordable premiums. Lenders are protected with mortgage insurance if the borrower is unable to make their mortgage payments. This allows the lenders the flexibility to offer home buyers with low down payments the same low-interest rates that they would offer homebuyers with down payments 20 per cent or higher.

Premiums stay the same

Over the time that a borrower is insured with mortgage insurance, their insurance premiums will remain the same. Although, home buyers should be aware that the payout from it shrinks as they pay down their mortgage, since the policies are there only to cover the outstanding debt.

Ability to port mortgage insurance

Home buyers with mortgage insurance will still have the ability to port (transfer) their mortgage from one home to another within Canada. Porting a mortgage means that a borrower takes their existing mortgage from one property to another. Along with the mortgage comes the current terms and rate. You can only port a mortgage when a borrower is selling their old house at the same time as buying a new one. This is a beneficial feature to have when the mortgage rate is lower than what is currently being offered by lenders. This feature can save borrowers thousands of dollars and they won’t be charged a prepayment penalty.

While there is a stigma around mortgage insurance as being bad, there are still many benefits to having it. Some borrowers wouldn’t be able to afford a home. For others, it would take years for them to save up enough money for a down payment. If you are looking for more information on how mortgage insurance can help you, get in touch with us here!