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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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5 Mistakes to avoid when getting a Self-Employed Mortgage!

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self-employed mortgage

A self-employed mortgage is a loan available to business owners and entrepreneurs and individuals who are working for themselves. These are considered to be mortgages of higher risk as the income of the borrower depends on the business and is not fixed. This is why lenders are a little weary when it comes to giving self-employed mortgages. Here is a list of mistakes to avoid when getting a self-employed mortgage. This can help you ensure that you are approved for the mortgage.

  1. Don’t understate or overstate your income.
    The most common mistake self-employed people make is to either overstate their income to get better loans or understate their income to avoid tax payments. If you have overstated your income, the lender might give you a better offer but you will be left with nothing to cover the costs of the home. Providing adequate income information can get you the right loan.
  2. Don’t avoid credit cards.
    Most individuals seeking a self-employed mortgage assume that not having a credit history or having very little of it will ensure that they do not have a bad credit score. But lenders handing out self-employed mortgages want to know if you are capable of paying off your debts on time. Not having a credit history can work against you.
  3. Don’t focus only on interest rates.
    Interest rates are only a part of the payment in self-employed mortgages. There are legal fees, taxes and even the principal of the mortgage to be considered. Even if the interest rates seem attractive, you must look at the additional, hidden and overall costs involved.
  4. Not considering your options could cost you.
    You may feel that you will not get a better rate than the one your bank, to whom you’ve been a trustworthy client is offering. That is hardly ever the case. There could be rates which could result in a difference of thousands for you and you would be unaware. You must shop around before finalizing.
  5. Don’t forget to hire a mortgage broker.
    The best thing to do when seeking a self-employed mortgage is to hire a broker. If you have bad credit or are unable to understand the procedures, a mortgage broker can make it simple and also give you access to a number of lenders. He can also help you decide the best plan for you.
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