MORTGAGE DEFAULT INSURANCE
For many Edmontonians, the hardest part of buying a home is coming up with the funds necessary for a down payment (especially if it’s their first home). Homebuyers who opt to put down less than 20% of the overall purchase price will be required to include Mortgage Default Insurance into their mortgage.
While this type of insurance protects your lender in the event of mortgage payment default, it also helps make homeownership possible (and in many ways, more affordable).
By paying Mortgage Default Insurance, CMHC, Genworth and Canada Guaranty will enable you to mortgage up to 95% of a home’s overall purchase price. This means you can purchase a home with as little as 5% down (the minimum 5% down payment required).
Ex: On a home with a purchase price of $250,000, with the 5% minimum, you’ll require a down payment of just $12,500.
While Mortgage Default Insurance will result in a slight increase to your monthly mortgage costs, it does make homeownership possible for thousands of Edmontonians, who would have otherwise had to wait much longer.
How To Qualify
Once the following conditions are met, you’ll be eligible to apply for either CMHC, Genworth, or Canada Guaranty Insurance:
The home to be occupied as your principal residence is located within Canada.
Your home-related expenses, including mortgage payments, property taxes and heating costs do not exceed more than 39% of your gross household income. This is referred to as your Gross Debt Service or GDS Ratio.
Your total monthly debt load, including car payments, credit card interest, housing expenses, student loans, etc., does not exceed 44% of your gross household income. This includes the debt associated with your mortgage payment and is referred to as your Total Debt Service or TDS Ratio.
You must provide proof of the minimum 5% down payment as well as an additional 1.5% (of overall purchase price) to cover closing costs (legal fees, title insurance, appraisals, etc.).
Note: Your Mortgage Default Insurance payment will vary according to the purchase price of the home and your down payment. To determine actual costs, give us a call or visit the CMHC, Genworth, and Canada Guaranty website for more information.