As you probably already know, there are a lot of costs associated with buying a home. It’s important to be as prepared for these costs as possible so that you’re not cutting it too close in terms of finances. One of the “extra” bills you may have to pay is mortgage insurance. But do you really need it, and how does it work?
Not all new homebuyers will need to purchase mortgage insurance. If you have saved up enough to put 20% down on your home, you are in the clear! Homebuyers who put under 20% down will be required to carry private mortgage insurance. It’s important to note that in Canada, the minimum down payment required on a home is 5%.
In a perfect world without outstanding debt, this would be the ideal choice. More and more people are paying the minimum just so that they can break into the housing market. Mortgage insurance allows homeownership to be a reality for many people who just don’t have the ability to pay several thousands out of pocket all at once. The insurance will be added to your total monthly payments, so you won’t need to be spending years saving up.
The amount you will have to pay is dependent on what the lender covers versus the size of your down payment. The more you put down, the less you will need to pay in the long run. Make sure to sit down with your lender in order to determine what your payments will look like and how your budget will be affected.
There was a time when a 20% down payment was required to successfully purchase a home. That time has come and gone, and now people are able to put significantly less money down while still being able to call themselves homeowners. This is made possible by mortgage insurance, a cost that should be taken into account when purchasing a new home. If you’re considering a new home and you’re not sure what mortgage insurance may look like for you, give us a call and we would be happy to advise!
Source was absolutely great to work with - went above and beyond to help us get everything done when buying our new home. Highly recommended!! Chad and Jenelle Richards Jan 09 2013
Chad and Jenelle Richards
Added January 23rd 2013
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