Even though the modern borrower obtaining a mortgage loan is a lower risk, there is still an insistence in the mortgage industry for borrower to obtain mortgage insurance if the down payment is less than 20%. The ability to cut this amount is essential for home buyers to save money. This is due in large part to the fact the amount paid is all in one lump payment rather than spread out over a span of months as it is in the United States. Cutting your premiums is not an easy endeavor, and it may mean paying a little more money in another area, but in the end, you will save money.
Canadian Insurance Premiums Are High
The mortgage insurance premiums in Canada are the highest in the world. This is despite the fact borrowers have been consistently becoming lower risk than most of the rest of the world. A look at the market will attest to the fact the arrears are at the lowest they have been in history. Additionally, the credit quality of the buyers is the highest they have ever been. This should result in lower mortgage insurance premiums, but unfortunately, it is still not as simple of a process.
Why Mortgage Insurance Is Required
One thing which is hard for someone with good credit to understand is why mortgage insurance is necessary. Mortgage insurance is designed to protect the mortgage company, and indirectly the borrower as well, if the borrower should not be able to make a payment at any given time. The lender will still receive a payment, even if the borrower has an inability to pay.
The reason why this insurance is tacked onto homes with a low down payment is because it indicates to the borrower an inability to plan financially. They feel as if you may have jumped into the situation hastily and they want to be protected in case you got in over your head. This has been proven to be an ineffective argument in the past few years, but the market is still making a lot of money from the insurance premiums, so they are not likely to make a change.
How to Lower Your Premiums
The best way to lower your insurance premiums is through a mortgage broker. They can help you to argue your case to the mortgage company as well as the insurance company. You can demonstrate your good credit history and make sure you are able to pay the lowest possible premiums on your rate.
The absolute best way to assure you are going to pay the least amount on your mortgage insurance is to pay a higher down payment. If you can wait another year or two to build up more money in savings for your down payment, you will be able to make a better case for lowering, or eliminating, your mortgage insurance premiums. Discuss your options with your mortgage broker to make sure you are choosing the best solution for your particular financial situation.
