Insurance & Your Home Purchase
Understanding the Difference Between Insurance Offerings
There are many types of insurance related to the purchase of a home - let's explore what they are and how to acquire them...
1.Mortgage Default Insurance (CMHC/Sagen/Canada Guaranty)
Default insurance is mandatory when a down payment is less than 20% of the purchase price (optional with more than 20% down). There are three default insurance providers in Canada: CMHC, Sagen, and Canada Guaranty. This insurance protects the Lender in case the borrower defaults on the mortgage. Premiums are calculated based on the mortgage amount divided by the value of the home which is then added to the total mortgage - this means you don't have to pay for it up front. Mortgages backed with default insurance are considered to be less risk = better rate options.
The Lender will apply for the insurance/obtain during the mortgage approval process. The cost (aka premium) is the responsibility of the borrower.
2.Home Insurance (Fire Coverage)
You will be required to prove that you have (at minimum) Fire Insurance coverage before your mortgage funds will be released. This can be acquired through an insurance company (many borrowers look to bundle their auto/home insurance for further savings). Your "Insurance Binder Letter" must name the Lender/payee - this information can be found in your mortgage commitment provided by your mortgage agent.
This type of insurance protects the Title of the property re: issues that may arise from previous owners i.e. permits not obtained for work done in/around the property such as renovations, encroachments or title fraud. There are two types available. These can be requested through your lawyer (signing appointment).
- Borrower - this policy protects the borrower, obtained at a discount when purchasing the mandatory Lender policy.
- Lender - the majority of the time this is a mandatory requirement to funding (via the lender); it protects the lender should something come up on Title. This policy does not protect the borrower unless the borrower policy is also purchased.
4.Mortgage Life/ Disability Insurance
This insurance protects the borrower should the unexpected happen and mortgage payments cannot be made. Take care of your largest bill with Mortgage Payment Protection Insurance - protecting you/your loved ones before it's needed.
While you can obtain this coverage through a variety of companies your Axiom Mortgage Agent can offer you an option that is portable - meaning you will have coverage (because it's portable) ; even if you decide to switch lenders during your mortgage term (unlike the bank).
For further information on any of these insurance options please contact us: