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First Time Homebuyer Series: Insurance?

Especially when you’re a first time home buyer, you’re going to hear a lot about different types of insurance. Since it can be a bit challenging to decipher which is which, some people may go on in life thinking that they are covered when something happens, when they are not.

To give you all some clarity, here are 4 different types of insurance that you will likely come across when getting your mortgage.

1. Mortgage Default Insurance This is also known as CMHC insurance. CMHC, Genworth, and Canada Guarantee are the companies that will insure mortgages to protect the lender’s assets in case of default. Default can be not paying your mortgage, not paying your property taxes, and even being late on your mortgage payments. Mortgage Default Insurance is required anytime you are putting less than 20% down.

The premiums for default insurance is as follows: 4.00% of the mortgage amount for a downpayment of 5-9.99% 3.10% of the mortgage amount for a downpayment of 10-14.99% 2.80% of the mortgage amount for a downpayment of 15-19.99%

You can also obtain mortgage default insurance when putting 20% down or more, however it is not required.

2. Mortgage Insurance Your mortgage lender or broker will most likely offer you mortgage protection insurance also known as creditor insurance. This protects you in case of loss of life, disability, or job loss. This covers the mortgage amount or payments depending on what you choose.

An alternative to creditor insurance is insurance through an insurance agent. Insurance brokers will be able to give you many coverage options in case of loss of life, disability, critical illness, job loss, etc. This coverage is not tied to your mortgage amount.

It’s important to be educated about your insurance options and make an informed decision when it comes to coverage, especially when you’re taking a large loan amount like a mortgage. You never know what and when things may happen.

3. Home Insurance Home insurance is also known as property insurance. One of the requirements of your lender will be Fire Coverage on your home with them as the First Loss Payee. It’s a good idea to talk to a Property Insurance Broker to discuss your options and get the coverage that works best for you and your family.

4.Title Insurance This protects owners and their lenders against losses related to the the title or ownership of the property. It is a requirement of mortgage lenders and this can be obtained through your solicitor’s office when you go to do your closing appointment.

With the many different types of insurance, it can certainly be confusing. Be sure to talk to your mortgage broker about your options as they will likely be able to guide you through it.

If you have any questions regarding any mortgage related insurance please contact Rose Blankenagel at anytime.

-Real Mortgage Advice