What Is Mortgage Insurance?
Mortgage insurance is generally required when your down payment is less than 20% of the home's purchase price.
The insurance protects the lender, not the borrower, in the event the mortgage cannot be repaid.
Although mortgage insurance adds a premium to your mortgage, it also allows many buyers to purchase a home sooner without waiting years to save a larger down payment.
Buying a Home with Less Than 20% Down?
You don't always need a 20% down payment to buy a home.
Many Canadians purchase their first home with a smaller down payment. In these situations, mortgage insurance may be required, making homeownership more accessible while helping protect the lender.
I'll explain how mortgage insurance works, when it's required, and how it may affect your mortgage options so you can make informed decisions.
When is mortgage insurance required?
Mortgage insurance is generally required when:
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Your down payment is less than 20% of the purchase price.
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The mortgage meets current insurer eligibility requirements.
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The property qualifies under applicable lending guidelines.
I'll explain whether mortgage insurance applies to your situation and what it means for your financing options.
How does mortgage insurance affect your mortgage?
Mortgage insurance can:
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Make homeownership possible with a smaller down payment.
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Increase your financing options.
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Add an insurance premium to your mortgage.
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Affect your total borrowing costs over time.
Understanding both the advantages and the costs will help you determine the approach that best fits your financial goals.
Things to consider
Before deciding how much to put toward your down payment, it's worth considering:
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How much savings you'd like to keep after closing.
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Your monthly budget.
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Closing costs.
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Emergency savings.
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Your long-term financial goals.
Sometimes a larger down payment makes sense.
Sometimes buying sooner with mortgage insurance is the better choice.
The right approach depends on your individual circumstances.