Is your mortgage insured or insurable or uninsurable???? Should you care??
Why should you care if your mortgage is insured or insurable or uninsurable ??
Insured Mortgages
- All home purchases with less than 20% down payment, government mandated – you must purchase mortgage default insurance.
- Home purchases with more than 20% down payment, insurance may be available for purchase.
The absolute best rates are for mortgages that are insured by one of the 3 Canadian mortgage default insurance companies: CMHC, Genworth or Canada Guarantee. You pay for the mortgage default insurance upfront. The lender benefits since they have little or no risk for their money, since the mortgage is insured.
Insurable Mortgages
The mortgage is “stress tested” at a higher than the borrower would be paying to ensure borrowers can afford their mortgage if the rates raise (at time of this BLOG, the Canadian qualify rate is 4.64%). Maximum amortization 25 years.
Lenders may choose to pay for mortgage default insurance on mortgages where the borrower has more than 20% down payment. This insurance protects the lenders from a loss. In the mortgage industry, we call this back-end insuring.
Uninsurable Mortgages include:
- refinancing (you want to pull some of the equity out of your property)
- mortgage on rental properties
- mortgages approved at 30 years amortization
- properties worth over a $1 million (not hard to do in Vancouver & Toronto).
The changes have limited the mortgages that lenders are allowed to insure using Canadian Government backed insurers. Essentially the Government is intentionally passing on the risk to Lenders by implementing stricter insurance qualifying guidelines and limiting mortgages that can be insured to what they consider lower risk.
The responsibility is now on the lender to absorb more costs if a borrower defaults. The end result is no surprise… lenders pass the additional costs on to borrowers.
The following is a list guidelines the government has issued for insurers – anything outside this means your mortgage rate could be higher.
- 25-year maximum amortizations
- Must qualify by using a rate stress test
- Maximum Gross Debt Service Ratio (GDS)* of 39% (shelter expenses)
- Maximum Total Debt Service Ratio (TDS)* of 44% (all liabilities)
- No refinances
- No single unit rentals
- Purchase price must be less than $1 Million
As an independent Mortgage Broker, about 40% of the mortgages I do fall “outside the box”. I have a vast amount of mortgage options available to cover your “inside” and “outside” the box mortgage requirements.
Give me a call and let’s have a chat about a mortgage that works for you… not the bank.
Kelly Hudson
Mortgage Expert
Mobile: 604-312-5009
Kelly@KellyHudsonMortgages.com
www.KellyHudsonMortgages.com
