Mortgage Insurance

The mortgage insurance premium is paid once, at the time of closing, and may be added onto the mortgage or paid separately. Most of the time, however, it is added on top of the borrowed principal and the mortgage payments are calculated based on the total amount.

The premium rate varies from 0.50% to 6.00% of the mortgage amount depending on the size of your down payment.

There are currently 3 providers of Mortgage Insurance in Canada: CMHC, Genworth Financial and AIG.

Contrary to the popular belief, Mortgage Default Insurance provides coverage to the Lender, not the borrower. In case the Lender has to take over the property and sell it to recover the loan, the insurer will pay the Lender the amount equivalent to the shortfall on sale (i.e. if the Lender can't sell the property for a price sufficient to recover the whole outstanding balance of the loan). However, this is not where things end as far as the borrower is concerned. The insurer still has the right to go after the borrower to recover the money paid to the lender. In other words, the borrower is not "off the hook" in case of default just because they paid the Mortgage Insurance premium.

Mortgage Life Insurance

This type of insurance covers the remaining borrower upon the death of the other borrower.

In case one of the borrowers passes away, the Insurance Company will pay the existing balance of the mortgage to the Lender and this way the property will become "free and clear".