For many first time buyers in Ontario, saving a 20% down payment isn’t always realistic, and that is where mortgage insurance becomes essential. Often seen as just another cost, it actually plays a key role in helping you qualify for a mortgage sooner and also strengthens home protection.
This guide breaks down why mortgage insurance exists, how it works, and how it can be a stepping stone, not a setback, on your path to homeownership.
What is mortgage insurance?
Mortgage insurance is a policy that protects your lender if you can’t make your mortgage payments.
In Ontario, if your down payment is less than 20% of the home’s price, you must get mortgage loan insurance.
This rule exists because smaller down payments mean higher risks for lenders. For example, if you buy a $600,000 home with 5% down, you will need mortgage insurance to get your loan approved.
The insurance lets you buy with as little as 5% down, an opportunity to make your homeownership dream a reality.
Why is mortgage insurance necessary?
Mortgage insurance is necessary for several reasons:
First, it helps more people qualify for mortgages. In 2023, over 48,000 Canadian homes were bought using mortgage loan insurance.
Second, it protects lenders from financial loss if a borrower defaults. This mortgage protection encourages banks to approve more loans, even for buyers with smaller down payments.
Third, it stabilizes the housing market by reducing risky lending. For buyers, this means you can access better rates and more flexible terms.
Without mortgage insurance, home buyers in Ontario would have to wait years to save a 20% down payment, thus missing out on building equity sooner.
Support for Home Protection and Loan Approval
Home protection is a key benefit of mortgage insurance. If you lose your job, become critically sick, or pass away, optional mortgage protection insurance can cover your mortgage payments, so your family isn’t at risk of losing the home.
For example, if you become disabled, mortgage protection can pay your monthly mortgage until you recover. This extra layer of security brings peace of mind. On the lender’s side, insurance strengthens loan approval because it lowers the risk for banks.
Additionally, there is also a solution if you are keen to see how much your mortgage insurance premium will be. You can use a mortgage insurance calculator to estimate your costs.
Types of Mortgage Insurance and Protection Options
There are several types of mortgage insurance in Ontario, including the following:
- Mortgage loan insurance: Required for down payments under 20%.
- Mortgage protection insurance: Optional coverage that pays your mortgage if you can’t due to illness, disability, or job loss.
- Mortgage life insurance: Pays off the mortgage if you die. This protects your family from losing their home.
Each type of home protection offers different benefits, so consider your needs before choosing a policy.
We Are Your Expert Mortgage Insurance Guide
Like highway bridges, mortgage insurance connects you to homeownership when your down payment isn’t enough to cross the gap. Without a guide, though, you might pay tolls (premiums) you don’t understand or take detours (poor terms) that cost you years.
As one of Ontario’s most trusted brokers, Northwood Mortgage acts like a GPS. We map the fastest, affordable route for you.
It doesn’t matter if your credit score is low; we will steer you to lenders who specialize in navigating rough terrain, slashing your mortgage insurance premiums by thousands. We don’t just explain the rules; we will walk you through all the various paths.
Don’t wait for the perfect time. Call Northwood Mortgage at 888-495-4825 or contact us online, so our expert brokers can find your ideal mortgage loan insurance solutions.
