Insured, Insurable, Uninsurable?

Mortgage rate pricing is based much on insurance:

 

Insured mortgages are covered by mortgage default insurance through one of three insurers – CMHC, Genworth or Canada Guaranty. A premium is added to the mortgage amount. The amount is a percentage of the loan based on the loan to value ratio with a down payment of less than 20%. These mortgages are most favored by the banks and are reflected by the best rate offers.

 

Insurable mortgages do not necessarily require you to pay an insurance premium when you are providing a down payment larger than 20%. However, if the insurers rules allow, the lender has the option to obtain insurance them selves.

 

Uninsurable mortgages do not meet the insurers rules; such as refinances and mortgages with amortization longer than 25 years. So, no premium can be paid by either the borrower of the lender to obtain default insurance. The risk associated with these mortgages is passed onto the borrower via higher interest rates.

Refinance Plus Improvement Mortgage

A refinance plus improvements can help you finally complete those home renovations you have always wanted to do! A conventional refinance enables a homeowner to borrow up to 80% of the fair market value of their home.

So, the equity a homeowner can access would be the difference between 80% of market value and the amount they currently owe outstanding on their current mortgage. This equity can be used for improvement on the home. But what if you go out and get estimates for the total cost of the project from a contractor and this isn’t quite enough money for the renovation project?

Well, these improvements also have the added bonus of potentially increasing the value of the home! A Refinance Plus Improvements Mortgage considers the post renovation (higher) value of the home, and allows a homeowner to borrow up to 80% of this increased home value.

Get your hard hats ready, and start renovating today!