What is Mortgage Insurance

Mortgage protection insurance and mortgage insurance should not be confused with mortgage default insurance. 

Mortgage protection insurance is made available by numerous lenders and insurers and provides protection to a borrower in the event of sickness, disability, loss of job in some cases and death.  Mortgage protection is also available when it is not packaged with the actual mortgage product or lender.  Borrowers can in many cases obtain better and less expensive coverage by obtaining insurance through an insurance company directly.  For example, many financial professionals believe that the mortgage protection insurance against death is better provided by insurers and insurance professionals who can help establish suitable term or whole life policies when the amount of payment upon death is not based on a depleted mortgage principal amount. 

Selecting appropriate mortgage insurance and insurance planning requires significant analysis.  Only licensed life insurance agents are able to provide life insurance, critical illness insurance, disability insurance and long term care insurance. 

Mortgage default insurance on the other hand is required for non-conventional high ratio mortgages. 

Mortgage default insurance in Canada is provided by CMHC (Canada Mortgage Housing Corporation), Genworth Financial Canada, and Canada Guaranty. 

With high-ratio mortgages, borrowers still have to have a down payment of at least 5%.

Mortgage default insurance provides insurance to the financial institution providing the funding on the mortgage, thus eliminating the risk of the loan in cases whereby individuals have less than 20% down on a residential property.  Mortgage default insurance premiums are paid for by the borrower, and are usually paid up front or added to the amount borrowed on the mortgage. 

Non-Conventional mortgages in Canada can be amortized over a 25 year period. 

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