Lenders require mortgage loan insurance if a borrower has a down payment of less than 20% of the purchase price of the home. By protecting lenders against default, Mortgage Loan Insurance creates an opportunity for homeownership. As the average prices of homes across Canada continue to increase, this insurance is more of a norm than an exception.  Let’s take a look at how it works.Down Payment

Down Payment Amount

You will typically need a minimum down payment starting at 5%.  For a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion. For CMHC-insured mortgage loans, the maximum purchase price must be below $1,000,000.

Where does the Down Payment come from?

Typically, your down payment comes from your own resources. However, a gift of a down payment from an immediate relative is acceptable.  For some, borrowed funds and builder incentives may be acceptable. This is on an exception basis and specific to some lenders.  Therefore, it is advantageous to use a knowledgeable Mortgage Broker.

Qualifying Criteria

This is where Jennifer Rossides is invaluable to you.  Because the lender options and guidelines differ from one institution to the next.  Typically, your total monthly housing costs, including Principal, Interest, Property Taxes, Heating and 50% of applicable condominium fees, can’t be more than 32% of your Gross Household Income (GDS ratio). Furthermore, your Total Debt can’t be more than 42% of your gross household income. The Total Debt Service (TDS) ratio is your GDS + payments on all other debt (credit cards, car loans, child support).

Who Arranges the Insurance?

Your lender will arrange for the purchase of Mortgage Loan Insurance through CMHC, Genworth or Canada Guaranty. Together with your Mortgage Broker, you will choose the best mortgage option. It includes rates and features that are best for you.  Lastly, it is important to note that like any other kind of insurance, there are premiums to be paid. The lender passes on the cost of insurance to you, the borrower. The premiums can be paid up front in a lump sum or blended in with your mortgage.

Any questions can be answered with the help of a qualified Mortgage Broker.  Please give me a call at 613-867-8076 or send Jennifer Rossides an email at jenr@lendinghand.ca  Start today to find a Smart Mortgage Solution that’s right for you.

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