Mortgage  Insurance is a form of insurance specially designed to protect a repayment mortgage. If the policyholder were to die while the mortgage life insurance was in force, the policy will pay out a capital sum that will be just sufficient to repay the outstanding mortgage.

Even though your mortgage debt reduces over time, your premiums remain level. If you die, only the outstanding balance on your mortgage is paid off.The mortgage lender is automatically the beneficiary. If you take your mortgage to another company, you may lose your existing mortgage insurance and may be required to re-qualify for new mortgage insurance. You lose all your coverage when your mortgage is repaid, assumed or in default. You have no flexibility to change your coverage as your needs change.

According to federal banking law, mortgage shoppers with less than a 20% down payment are required to purchase mortgage loan insurance.Borrowers who purchase a home and have a least a 20% down payment are considered low-risk borrowers. Think about it from a lender´s perspective, if a borrower has been disciplined enough to save at least a 20% of their home´s purchase price, they must be financially savvy.Hence, no mortgage loan insurance required.

Borrowers who put down less than 20% are considered riskier borrowers. Even with stellar credit, if you apply for a mortgage and don´t have at least a 20% down payment, you will have to purchase mortgage insurance.

* Payout: Many of these policies payout out from the 31st day that you´ve been out of work

* Length of Coverage: Most pay out for at least 12 months; some provide 24-month coverage.

* Tax-Free. The income paid to you over this time is tax free. Although, check with your tax preparer for specifics as they relate to your financial situation.

* Exclusions: All home mortgage insurance policies have exclusions. And, they vary from carrier to carrier. Some exclusionary information you want to check are details that pertain to, for example, self-employed workers, age of retirement, length of time employed, etc.

* Cost: Costs on this type of home mortgage insurance varies widely, but it is not cheap. Shop around for competitive rates.

Mortgage Insurance Rates

Mortgage insurance rates used to be flat-fee charges. In recent years, this has changed.

Many mortgage insurers now used an innovative policy known as risk-based pricing.

What are risk-based mortgage insurance rates policies?

These policies based your mortgage insurance premiums on your credit score. The better your credit score, the lower your premium. This is particularly advantageous to buyers with stellar credit who don´t have the typical 20-25% to put down.

Lender Paid Mortgage Insurance  

* Cost included in the interest rate

* Lower monthly payment

* Potentially larger tax deduction

Risk Management

Mortgage insurance is generally required on a loan for which the loan-to-value ratio is greater than 80 percent. Put another way, it is a loan for which the borrower has not put provided the typical 20 percent down payment. The reason it is used is because a borrower is more inclined to walk away from a house with less equity.

If you have further query please contact Canada Insurance Plan.