When I ask “Do you have mortgage insurance?” I often get either one of these two responses:
1) I put in more than a 20% downpayment so I didn’t have to pay it
2) I have enough term/whole life insurance to cover pay off my mortgage
Both can be valid responses depending on the context because both are often called mortgage insurance. They are entirely different, and, you may need one or the other, both or neither.
What some people call mortgage insurance is called “Mortgage Loan Insurance” by Canada Mortgage and Housing Corporation (CMHC) and called “lender protection insurance” by me. This one allows you to get a mortgage up to 95% of the home’s value (under $1 million). That comes with risk so, this insurance was put in place by the Canadian Government to protect the lender if a client defaults on their mortgage. This is paid at the time of purchase and can be included in the total mortgage amount.
What other people call mortgage insurance is called “Mortgage Protection Insurance” by Simplinsur and “payment protection insurance” by me. Think of this one like car or home insurance as you pay a monthly premium. Having it will protect you and your family from having to worry about your mortgage in the unfortunate event that something happens. This can also include disability or critical illness insurance so your payments are covered while you focus on your health.
Let’s talk about mortgage insurance. I can offer you advice to help you decide if either type is right for you during your mortgage process.