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Home Buyers In Canada are Getting Mortgage Insurance – Should You Care?
The Canadian housing finance system has made it possible for you to buy a residence in Canada even if you are not able to save enough for the money down. Better yet, it allows purchasers to purchase a loan with a 5% down payment, but will be able to get an interest rate as if you made a 20% down payment.
How can this be? You are able to get such a great deal because they require the purchase of loan insurance for the amount borrowed. This reduces risk from the loan for the lender and enables you to purchase a residence without having to front the entire down payment.
Who Qualifies?
The buyer must qualify for loan insurance, so not everyone will be able to participate.
The residence needs to be in Canada to meet the first requirement. The buyer must make a down payment of at least 5% on single-family and two-unit homes and 10% on three- or four-unit dwellings. The down payment needs to come from your own resources, but it is acceptable for an immediate relative to donation you the money.
Also, the total monthly housing expenses that include principle, interest, property taxes, heat, the annual site lease in case of household tenure, and 50% of applicable condominium fees should not represent more than 32% of your gross household income.
Also, to qualify for the loan insurance, your liability load should not be more than 40% of your gross household income.
Other factors that can conclude if you qualify for loan insurance or not are closing expenses and fees.
How much does it cost?
The lender pays for the loan insurance by paying the insurance premiums. The expense will get passed on to you, but it is the lender who pays the initial insurance premium.
Does loan insurance cost a lot? It depends on who you talk to. The price of the insurance and the amount of the loan are directly correlated. The more you're lended, the higher insurance will be. This helps buyers who save more for a down payment.
Lenders even give buyers options on how to pay the insurance premium. The insurance premiums can be paid monthly as a part of the buyers loan payments or up front in a large lump sum.
You are not safe just because you purchased loan insurance if your loan is defaulted. It just insures the lender on the money you borrowed. On the bright side, you got to purchase a residence with little money down and a good interest rate.
See us at www.infoprimes.com to see how you can save on loan insurance rates.
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