Canadian homeowners and real estate investors may not have a clear understanding how the Canadian mortgages work. All mortgages in Canada are compounded semi-annually. Mortgage penalties and administration costs are mostly misunderstood or not being explained to borrower of the mortgage.
Mortgage life insurance is one of the mortgage insurance options that pays the balance on your mortgage to the lender in the event of your death. This can be useful if you have dependents or a spouse who might like to stay in the home after your death, but who might not be able to continue making the same mortgage payments as before.
Mortgage default insurance (sometimes called mortgage loan insurance) protects the mortgage lender in case you are not able to make your mortgage payments. It does not protect you.
You must pay it if your down payment is less than 20% of the purchase price of your home. This is called a high-ratio mortgage. Your mortgage costs will be higher if you need to get mortgage default insurance.
The maximum amortization period is 25 years for mortgages with mortgage default insurance.
Mortgage default insurance is only available for high-ratio mortgages if the purchase price of the home is less than $1 million.
If you can put at least 20% of the purchase price of your home as a down payment, you will have what is called a conventional mortgage. In this case, mortgage default insurance is generally not required. There are exceptions to this—for example, where your salary is not paid on a regular basis.
Your lender will make the arrangements for the mortgage default insurance if it is needed.
How much are the premiums?
The premium—that is, the cost of mortgage default insurance—will vary depending on the down payment: the bigger your down payment, the lower your mortgage default insurance premium. Usually, mortgage default insurance premiums vary from 0.6% to 3.85% of the borrowed amount.
The premium can be added to your mortgage loan and included in your mortgage payments, or you can pay for it upfront in a lump sum. If the premium is added to your mortgage, you will pay interest on it at the same interest rate you pay on the principal amount of your mortgage.
Some provinces apply provincial sales tax (PST) to mortgage default insurance premiums. Provincial taxes on premiums cannot be added to your mortgage loan. You must pay these taxes when your lender funds your mortgage.
P.S. Success isn't a matter of chance, it's a matter of choice. So it's up to you to make the right choice to become successful. If you don't know what to do it starts with making the choice to register for this LIVE real estate investors training in your town now and making sure you make the right choice to SHOW UP!!!Learn more to earn more!
Mortgage: A mortgage loan, also referred to as a mortgage, is used by purchasers of real property to raise funds to buy real estate; or by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged. The loan is "secured" on the borrower's property. This means that a legal mechanism is put in place which allows the lender to take possession and sell the secured property ("foreclosure" or "power of sale") to pay off the loan in the event that the borrower defaults on the loan or otherwise fails to abide by its terms.