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What is an Insured Mortgage?

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INSURED MORTGAGE SIMPLIFIED.

An Insured Mortgage covered by Mortgage Default Insurance is called an Insured Mortgage.

Lenders apply for Default insurance, this default insurance covers the lender (not the borrower) against any losses related to borrower default and foreclosure. Currently, there are three insurers in Canada; CMHC, Canada Guaranty and Genworth.

Each of these insurers offers two types of insurance coverage.

Transactional Insurance, referred to as a High Ratio Mortgage: The one-time premium is added to the requested mortgages with Loan to Values greater than 80% (sometimes added to lower LTV’s in unique situations). This insurance premium is added to the mortgage balance at the time their mortgage is advanced. Lenders pays the insurers and the Borrowers are responsible for paying the insurance premium. The insurance premium is tiered and reduces, in case clients puts more down payment.  You can see a full breakdown of the premiums here

Portfolio Insurance or Bulk Insurance: This insurance is applied to mortgages with Loan to Values less than 80%.  Most often borrowers are not even aware that this coverage has been purchased as the premium is paid for by the lender or bank.  Mortgage Lenders like First National, Manulife, Marathon and MCAP have used this type of coverage on all the mortgages they fund. Big Banks also use this insurance to a lesser extent.  Mortgage Lenders buy this type of insurance in order to offer better  mortgage rates.

Since default insurance is added to help protect the lender, insured mortgages are viewed as a more secure and therefore borrowers often receive lower rates.

Contact your Finser Mortgage Broker or Agent to help you find the right mortgage solution suitable to your needs.

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Private Mortgages: Why They Are Worth It

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Private Mortgage

Self-employed individuals, persons who are new to Canada and other people with bad or bruised credit history may not be able to avail a traditional mortgage. It is better for them to go for a private mortgage. Even people who fit the criteria for a traditional mortgage opt for a private mortgage because they get better rates and are quicker with the processing. But what are private mortgages? Nothing but mortgages from private lenders. Here is a summarization of why considering a private mortgage is better than waiting till you are eligible for a traditional one;

  • Less documents are required.
    In many instances, self-employed individuals have been denied a traditional loan because they could not confirm their income on paper. Similarly, citizens who are new to Canada do not have a credit history and this makes them seem risky to lenders. But in such a mortgage, the need for less documents provides for a wider eligibility range for individuals.
  • Flexible with credit history.
    Most private lenders understand that you are looking towards them mainly because you have less credit history or a bad one. This means that they are way more flexible than the traditional lenders. If you have enough equity in your property or can make a significant down payment, then your credit history is of no consequence. This can really help self-employed people get the loan they want.
  • The value of the property is considered not your finances.
    Private lenders provide private mortgages based on the value of the property you are buying or taking the mortgage against. If the property has good equity, it seems like a lesser risk to lenders and hence they can offer good rates and make good deals.
  • Fast financing.
    One of the perks of getting a private mortgage is the speed. Since there is much less documentation involved and the rates are more favorable, the process moves along much faster. Mortgage brokers are able to find the best rates quickly and can help you customize the best rates and terms into your scheme.
  • Private mortgage brokers can get better deals.
    Since private lenders have higher risk tolerance than the banks, they are able to give you low rate deals and be flexible with the customization of the plan. This can make it more favorable for you as the private mortgage broker will be working according to your finances.

 

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