In Canada, there are two different products commonly referred to as
mortgage insurance. One is mortgage creditor insurance, which continues to pay
your mortgage payments in the event of death or disability. But the other type
of insurance--mortgage default insurance--also offers important benefits.
If you're buying a home and borrowing more than 80% of its value, your
mortgage is required to be covered by default insurance. This insurance
protects lenders from loss in case a loan isn't repaid. With this protection,
lenders are willing to offer loans with very low down payments--as little as 5%
of the loan amount.
For loans without default insurance, most lenders require a down payment
of 20%, which is a lot of money in today's housing market. Default insurance
allows you to enjoy the benefits of homeownership sooner, and insured mortgages
are generally approved more quickly.
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