Insurance Premiums
The Bank Act requires that a lender not exceed a loan of 80% of Lending Value unless the loan is insured through CMHC or GE Capital or AIG. These Insurers insure the mortgage on behalf of the mortgage lender so that if you default on your mortgage the lender's loan will be paid out. The Borrower pays for the insurance premium, and typically the insurance premium is added to the mortgage. However, borrowers have the option of paying this premium in cash at the time of closing. The insurance premium depends on your loan to value and type of program used to qualify the mortgage.
Example of Standard Premiums
|
LTV Ratio |
Insurance Premium |
|
|
up to 65% |
0.50% of mortgage |
|
|
65.1-75% |
0.65% of mortgage |
|
|
75.01-80% |
1.00% of mortgage |
|
|
80.01-85% |
1.75% of mortgage |
|
|
85.01-90% |
2.00% of mortgage |
|
|
90.01-95% |
2.75% of mortgage |
|
|
95.01-100% |
3.10% of mortgage |
|
Extended Amortization
Add 0.20% per five year extension with Extended Amortization from 25 to 35 years.
Some clients prefer to pay the premium upfront rather than adding it the mortgage and incurring interest carrying costs.