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My Mortgage Blog

There are three types of insurances involved in the mortgage process - mortgage default insurance, mortgage creditor insurance, home insurance.

Do you need all of them?

NO! You will always need home insurance but whether you need the other two will depend on if you want creditor insurance and what your down payment is.

Home Insurance - this is the insurance that you have on your home should something happen to it. Say for instance, if there was a fire in your home...the home insurance would pay for it to be fixed and thus the value of the home would still be there. With home insurance you will put the mortgage lender as first payee.

Mortgage Default Insurance - this insurance protects the lender should you happen to not pay your mortgage. It gives the homebuyer an opportunity to buy with a low down payment and the same low interest rates that they would offer to homebuyers with more equity. Mortgage default insurance is required if your down payment is less than 20% It is called a high ratio mortgage. For certain types of products mortgage default insurance can be required for down payments over 20% as well. Default insurance is added to your mortgage should you have less than 20% down payment.

Mortgage Creditor Insurance - This type of insurance preserves ownership of your family's home should you experience a life-changing event such as a job lay-off or a disabling accident. Mortgage payments don't stop when you're unable to work. There are four types of mortgage creditor insurance available: life coverage, disability coverage, critical illness coverage and accidental job loss coverage. You will be offered the opportunity to insure when you obtain your mortgage. Some already have life insurance, disability coverage, critical illness coverage and accidental job loss coverage. Some don't. Some have a portion of it. The key to this insurance is to make sure that if anything should happen to you (if you are on the mortgage and title) and the mortgage payment could not be made,  that it would not force your family to move out of their home and disrupt their lives.

I would suggest that you understand all of the insurances involved in purchasing a home and then seek out an expert to help you through the decision process. If you have any questions please feel free to email, text or phone me. I look forward to chatting with you.

Deb Murdoch, AMP
Live Lucky & Believe
306.222.7900  mortgages@debmurdoch.com