Are you a first-time home buyer in Ottawa looking to apply for a mortgage? Then consider getting mortgage insurance first. Mortgage insurance is an important financial tool that helps Canadians increase their borrowing power when purchasing a home. It allows borrowers to secure a mortgage loan with a lower down payment or higher loan-to-value ratio, which can make home ownership more affordable. Let’s explore the importance of mortgage insurance and how it can ultimately help you boost your borrowing power when purchasing a new home.
What is Mortgage Insurance?
Mortgage insurance is offered by the Canada Mortgage and Housing Corporation (CMHC), the largest mortgage insurer in Canada. It provides lenders with protection in the event that a borrower defaults on their mortgage payments. Mortgage insurance also helps to reduce the risk of lending to borrowers who may not have the financial stability to meet their loan obligations. This can allow lenders to offer more competitive interest rates and loan terms, making it easier for borrowers to qualify for a mortgage loan.
In addition to protecting lenders, mortgage insurance also offers several benefits for borrowers. Most notably, it allows borrowers to purchase a home with a lower down payment or higher loan-to-value ratio. This can make it easier for borrowers to qualify for a mortgage loan and may help them to access more competitive interest rates and loan terms. Mortgage insurance can also provide borrowers with additional peace of mind, as they know that their loan will be repaid even if they experience financial hardship.
How Can Mortgage Insurance Boost Your Borrowing Power?
First, it is important to understand that mortgage insurance in Canada is mandatory when a borrower has less than 20% of the purchase price for a down payment. This is known as a high-ratio mortgage. Mortgage insurance helps reduce the risk for the lender, as it guarantees the loan will be repaid even if the borrower cannot make their payments. This allows lenders to offer higher loan amounts to borrowers with a smaller down payment.
In addition to providing increased borrowing power, mortgage insurance also provides a number of other benefits. For example, it can help to reduce the amount of interest that you pay over the life of the loan. This is because the insurance company will pay a portion of the interest on the loan, which can reduce your monthly payments.
Mortgage insurance can also help to reduce the amount of paperwork required when applying for a loan. It can help to speed up the loan process by providing the necessary documentation quickly and efficiently.
How to Get Mortgage Insurance
In Canada, mortgage insurance is offered by Canada Mortgage and Housing Corporation (CMHC). CMHC offers two types of mortgage insurance: conventional and high-ratio. Conventional mortgage insurance is required for mortgages with a down payment of less than 20 percent. High-ratio mortgage insurance is required for mortgages with a down payment of less than 10 percent.
When applying for mortgage insurance, borrowers will need to provide proof of income, credit history, and assets. They may also need to provide proof of a down payment and proof of payment of the closing costs associated with the purchase.
The cost of mortgage insurance varies depending on several factors, including the size of the down payment and the value of the property. Generally, the higher the risk to the lender, the higher the premium will be.
Mortgage insurance is an important tool that helps increase the borrowing power of Canadians. It allows Canadians to purchase a home without needing to put down a large down payment, which is especially helpful for first-time buyers. Ultimately, mortgage insurance helps ensure that Canadians can access the financing they need to purchase a home and build wealth.
Need a mortgage specialist in Ottawa to help you with your mortgage application? Ottawa Mortgage Services is here to help. We value relationships and strive to provide exceptional customer service and experienced advice. Our goal is to ensure that you have the best possible experience and that you get the mortgage that meets your needs. Contact us today to learn more about how we can help you.