Uninsured vs. Insured Mortgages: What’s The Difference?

Are you looking for a mortgage, but aren’t sure the difference between uninsured mortgages or an insured mortgage? Well, you’re in luck, because this blog post will give you all of the information. I will chat through insured vs uninsured mortgages, who the insurance protects and how it’s different from home insurance.

Insured vs uninsured mortgages.

When you receive a mortgage, it can either be insured or uninsured. It’s exactly what the names say. One is insured with mortgage insurance and the other is uninsured and doesn’t have the same mortgage insurance. 

You will pay CMHC insurance premiums for an insured mortgage, while the lack of insurance in an uninsured mortgage means that you won’t have to pay additional premiums.

An insurable mortgage is a mortgage that can be insured, but may not be currently insured. An insurable mortgage can either be insured or uninsured (depending on your down payment – but more on that later.) The borrower isn’t always required to pay the premiums. The lender can choose to get the mortgage insured and pay the mortgage default insurance premiums themselves. 

An uninsurable mortgage is a mortgage that cannot be insured. It’s not possible for an uninsurable mortgage to ever be insured, whether the borrower or lender wants to have it insured.

So, what one is best for you and your situation? Continue reading to find out.

What is an insured mortgage?

Here are some important points to consider with an insured mortgage:

• Insured mortgages are available for purchases of owner-occupied properties under $1M with 25 year amortizations.
• With an insured mortgage, the minimum downpayment is 5% and cannot be 20% or higher. Any down payment between 5-19.99% automatically means an insured mortgage. 
• The premium is commonly paid for by the applicant via an equity stake on the property.  For example, let’s say you are purchasing a $400,000 property with a 5% down payment.  Your mortgage would be $380,000 PLUS an insurance premium of 4% of the mortgage amount.  Therefore, your total mortgage would be bumped up to $395,000 ($380,000 + $15,200).
• The lower your down payment, the higher your premium. 
• The insurance premium goes down in 5% increments at 10% down, lower and 15% down, lower and 20% down then no premium.

What is an insurable mortgage?

Here are some important points to consider with an insurable mortgage:

• The minimum down payment for an insurable mortgage is 20% down. If you do anything less than 20%, it will be insured. 
• These are available for purchases under $1M and mortgage renewal transfers with 25 year maximum amortization.
• Insurable mortgages are “bulk” insured as opposed to “transactionally” insured.  This type of mortgage protects the lender against default, but not to the degree of a transactionally insured mortgage above. 
• A plus for this type of mortgage is that the lender will pay the premium, not the applicant like I mentioned above. 

What is an uninsurable mortgage?

Here are some important points to consider with an uninsurable mortgage:

• The minimum down payment for an uninsured mortgage is 20% down.
• Can do up to a 30 year amortization.
• There is no bulk insurance on this and rates tend to be slightly higher if you do a 30 year amortization.
• Some lenders will have more flexibility with this type of mortgage.
• Can be confused with insurable, but with insurable you get better rates and the max amortization is 25 years.

Mortgage insurance vs home insurance. 

People often question whether mortgage insurance and home insurance are the same thing. Simply put, they are not. Mortgage insurance protects the lender in the event that you default and miss payments on your mortgage loan. 

Home insurance covers expenses that occur when something unexpected or accidental happens to your home and/or your belongings. No matter which type of mortgage you receive, you will need home insurance on top of that. 

Your next step is to reach out. 

If you’re ready to know what kind of mortgage and rates you qualify for, please give me a call at 250-826-3111. You can also fill out the form below or complete a pre-approval on my website. Then, I will reach out to you. I look forward to helping you in your home buying journey.