Mortgage insurance is designed for all homeowners and future homebuyers. There are two different types of mortgage insurance: mortgage life insurance (commonly called mortgage insurance) and mortgage loan insurance. It is important to understand the characteristics of each type of insurance and their particularities, as they do not have the same functions.
What Differentiates the Two?
In the case of mortgage life insurance, it is not mandatory. While it is not necessary to purchase mortgage insurance, it is important to understand the implications of this decision. However, if you want it, it will be very useful in the event of your premature death. This insurance will cover your mortgage payments and protect your family from financial hardship.
Mortgage loan insurance is not to be confused with mortgage insurance. They are two completely different policies. Mortgage default insurance is a mandatory coverage, for example by the Canada Mortgage and Housing Corporation (CMHC) or other institutions, that you must pay to your institution if your down payment is less than 20% of the price of the house. This is a protection for lenders in case of mortgage default.
Why Go Through a Broker?
When you buy a house, your institution will offer you mortgage insurance, but it will probably be more advantageous for you to purchase mortgage insurance through a broker. This way, the possibilities of payments, changes of beneficiary and benefits are more numerous and diversified. However, you should know that by law, your institution cannot force you to buy insurance from them.
In the event of death, mortgage life insurance will allow you to pay the indemnity to a beneficiary instead of your financial institution. In addition, in the event that you change financial institutions, you can keep your coverage without any implications.
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