• Do I need Mortgage Life Insurance?
• What is Title Insurance and who does it protect?
• What is Mortgage Loan Insurance?
• Under what circumstances can CMHC guarantee a mortgage?

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Do I need Mortgage Life Insurance?

Lenders cannot require you to purchase Mortgage Life Insurance. The only insurance they can legally require you get is fire insurance and hi-ratio mortgage insurance. However, it is important that you get some insurance coverage that will enable your beneficiary to pay off your mortgage in the event that you pass away. Mortgage Life Insurance pays the balance owing on the mortgage in the event that the owner or one of the owners dies. The intent is to protect survivors from losing their home.

While having a mortgage life insurance is recommended, it is better to get a normal term life insurance that could pay your beneficiary the equivalent value of your home, instead of just the balance remaining on the mortgage, at the time of the payout. If you don't have life insurance or would have a difficult time obtaining it, Mortgage Life Insurance may be a viable and economical option. Should you not have a normal life insurance by closing date, we recommend that you sign up for the mortgage life insurance while you speak with your financial planner or insurance agent about getting a life insurance with the right amount of coverage for your estate needs. This is so that in case anything happens, you or your beneficiary is covered. You will have up to 30 days from the time you sign up for mortgage insurance to cancel it without getting charged.

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What is Title Insurance and who does it protect?

Title insurance protects your ownership to the property and protects you against fraud (e.g. fraudulently obtained mortgages on your home), errors in surveys or other official public records, encroachments onto neighboring properties, zoning infractions, and many more known and unknown defects that could affect your ability to sell your property in the future.

It provides protection for both the borrower and the lender because it is a contract under which the title insurer indemnifies a property owner, lender or borrower against actual loss or damage sustained from covered title defects, fraud or forgery. It is not a guarantee of title, but rather compensates an insured if title is not as set out in the policy. Unlike house insurance, you only pay a one-time premium with no deductible and you receive industry leading protection.

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Q: What is Mortgage Loan Insurance?

Mortgage loan insurance, also called hi-ratio mortgage insurance, is required by law to help protect the lenders by insuring them against borrower default if the mortgage is more than 80% loan-to-value, or the borrower pays less than 20% down payment. It guarantees that the lender does not lose money in case of borrower default. It is usually provided by CMHC (Canada Mortgage and Housing Corporation – a crown corporation), Genworth (GE Mortgage Insurance Company – a private corporation), or AIG United Guaranty.

The insurance premiums are paid by the borrower either directly as a one-time payment or added to the mortgage amount. It ranges from .50 to 3.75% of the mortgage balance. For every 5 year increase in amortization beyond 25 years, a .2% increase is added to the premium rate.

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Under what circumstances can CMHC guarantee a mortgage?

CMHC will insure mortgages under the following conditions:

• When the mortgage is being refinanced up to 90% of the property’s market value.
• When the borrower is purchasing a home with only 5% down payment.
• When the borrower is constructing a home and wants a mortgage for 95% of the property’s value. The builder must be a Home Warranty Builder. To learn more, you may contact CMHC for specific guidelines.
• When purchasing a spouse’s interest in a property conjugally owned, up to 90% of the value, in case of divorce.
• When paying off existing mortgages.
• To provide for up to 95% of the renovation costs to a home.