Homebuyer’s in Canada require mortgage default insurance whenever they are placing less than a 20% down payment on their purchase. Typically, it’s most first time home-buyers that take advantage of mortgage insurance from either Genworth, CMHC or Canada Guaranty, to allow them to put as little as a 5% down payment on their purchase.
To help buyers understand a little more about the mortgage insurers in Canada, here are the answers to five of the most commonly asked questions when it comes to mortgage default insurance.
Who are CMHC, Genworth & Canada Guaranty?
CMHC stands for the Canadian Mortgage and Housing Corporation. It is a federal owned entity dedicated to regulation and insurance of high ratio mortgages. Genworth and Canada Guaranty are publicly owned mortgage default insurance providers.
Who needs default mortgage insurance?
Any home-buyer in Canada who enters into a high ratio mortgage (less than 20% downpayment), needs CMHC, Genworth or Canada Guaranty mortgage insurance in order to get a mortgage.
What does CMHC, Genworth or Canada Guaranty insure?
Mortgage default insurers are insuring the amount of money the home-buyer borrowed from the bank for the mortgage. Mortgage default insurance on your mortgage does not cover fire, health or title and deed. CMHC, Genworth & Canada Guaranty is in place to protect the financial institution who placed your mortgage in case of default or foreclosure.
Who pays the mortgage default insurance premiums?
The home buyer pays the premiums. The payment is calculated according to the amount of the mortgage and the amortization.
Who gets the mortgage default insurance payout?
In the event of foreclosure, the lender takes possession of the property and sells it to recover the remaining mortgage amount. Should the property sell for less than what is owed on it, the mortgage insurer pays the outstanding balance to the mortgage lender.
What to know more?
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