Mortgage Insurance 101

Kelly Hudson • October 4, 2018

Mortgage insurance… sounds simple doesn’t it??


For a first-time home buyer, the types of insurance surrounding a mortgage can be confusing, so it’s important to know what insurance covers what.

There are 3 main types of insurance to know about when buying a home.

Mortgage Default Insurance – If you put less than 20% down on a home you are buying, Government rules are you must pay for Mortgage Default Insurance which covers the lender should you default on your mortgage payments.

There are three mortgage default insurers in Canada – Canadian Mortgage & Housing Corp. (CMHC), Genworth or Canada Guaranty ) The purchase of this insurance solely benefits the bank/lender.

Mortgage Insurance and/or Life Insurance

You’ve just made the biggest purchase of your life: a new home for you and your family.

  • What’s the best way to protect your investment if you die?

Insurance is the answer. But what kind: mortgage insurance or life insurance? 

There are important differences between the two that we’ll examine.

Mortgage Insurance Life Insurance
Tends to be quicker to process. Can take 30-90 days to put into place.
Can be easier to qualify for. With individual owned insurance the medical underwriting is completed up front, so you know what is covered when your policy is approved.
Decreasing benefit – the amount of coverage with mortgage insurance decreases as you pay down the balance each month, while the monthly insurance payments remain the same. If you get coverage for $500K, it stays at $500K until you decide to change it, or your term expires.

Beneficiary is the lender/bank who holds your mortgage. You can designate the beneficiary/beneficiaries.
Mortgage insurance is attached to the outstanding balance on your mortgage. Life insurance is attached to you rather that your debt.
Typically, your mortgage insurance policy pays off the current balance on your mortgage to your lender/bank. The beneficiary(ies) decide what to do with the insurance.  Funds can be used to pay off the mortgage or any other bills (funeral, hospital/home care expenses, living expenses, education etc.).  It’s your money, and you can decide how to use it.
You can cancel anytime i.e. you find an insurance product that suits you better. You can cancel anytime i.e. you find an insurance product that suits you better.
Portability – mortgage broker sold Mortgage Insurance policies are portable. Which means that if you switch lenders or buy a new property, you will be able to transfer your Mortgage Life Insurance to a new property. Make sure you ask your Insurance Provider if the insurance they are recommending is portable. ·         Take note that when the bank offers you Mortgage Insurance you will not likely be able to transfer your Mortgage Life Insurance to a new lender or property thereby limiting your future financing options. Completely portable.  Doesn’t matter if you buy a different home or switch lenders/banks, life insurance follows you not your property.

Please note:  Mortgage/Life Insurance is not mandatory to qualify for a mortgage.

You have made the biggest purchase of your life… how do you protect yourself and your family?  Many people say they have life insurance through their work, but is it enough?

  • The question you should be asking is – do you currently have enough life insurance in place right now, equal to your mortgage amount?

Top Benefits of purchasing Mortgage/Life Insurance

  1. Peace of Mind – creates a sense of security that your loved ones will be taken care of if you pass on.
  2. Mortgage Can be Paid Off – whereby any other policies that are held will be able to assist with other needs.
  3. Family can Stay in their Home – if there is the unfortunate life event that is the death of the Mortgage/Life Insurance policy holder, the mortgage can be paid off which will allow the family to stay in their home and not become displaced, causing additional anguish.
  4. The Younger you are, the Less Expensive – Which means that insurance is extremely affordable for a young, and likely, first time home buyer.
  5. Good Health = Coverage for Unexpected Illness Later on – After illness strikes, it is more difficult to acquire life insurance.

Mortgage/Life Insurance is an option that anyone with a mortgage should consider. Ask me about a referral for reputable and credible insurance.

While we’re discussing insurance, there are other types of insurance you need to consider as well…

  • Fire insurance – most lenders will want to see that you have fire insurance in place, prior to funding your mortgage to “protect” their investment.

Additional insurance options:

  • Disability insurance
  • Personal content insurance

Mortgages are complicated… BUT they don’t have to be!  You need to protect your investment by engaging an expert.

Give me a call and let’s discuss a mortgage that works for you (not the bank)!

Kelly Hudson

Mortgage Expert

Mortgage Architects

Mobile 604-312-5009  

Kelly@KellyHudsonMortgages.com

www.KellyHudsonMortgages.com

Kelly Hudson
MORTGAGE ARCHITECTS
RECENT POSTS 

Everything You Need to Know about Mortgage Default Insurance. (updated June 2025)

By Kelly Hudson • June 19, 2025
Home buyers say the #1 obstacle to homeownership is saving enough money for a down payment. Mortgage default insurance (also called mortgage insurance) allows you to purchase a home with as little as 5% down . It protects your lender if you stop making payments. Typically, a 20% or higher down payment is your best option. However, for many Canadians, reaching this amount can be challenging, especially in expensive markets like Greater Vancouver & Toronto. If you don't have enough cash for a 20% down payment, Mortgage Default Insurance can help. How Much Down Payment Do You Need? 

Buying Bare Land in Canada: What You Need to Know

By Kelli Hudson • May 16, 2025
Have you ever dreamed of buying a piece of land and building your very own home from scratch? You're not alone! Buying bare land, especially in beautiful British Columbia, Canada, can be an exciting adventure or a money pit. Before you start dreaming of where to put your future house, there are a few important things you should know. What is Bare Land? Bare land, sometimes called vacant land, is just that—land without any buildings or structures on it. It's an empty canvas waiting for your ideas. But buying bare land isn’t quite the same as buying a house or apartment. It comes with its own set of rules and challenges, especially when it comes to financing. Why is Financing Bare Land Different? When you buy a home, Lenders feel safer lending you money because if something goes wrong, they can sell the house to get their money back. With bare land, it’s different because there’s nothing built yet. It’s harder to sell bare land – than a home. Which makes it riskier for Lenders, therefore they usually have stricter lending rules and higher interest rates to offset the risk. Important Things to Consider About Financing Bare Land: 1. Down Payments Can Be High Raw Land : This is completely untouched land without any utilities like water, sewer, electricity, or roads. Lenders often require a large down payment, sometimes around 50% of the land’s price. Due to the higher perceived risk, many lenders do not lend on raw, undeveloped land. Vacant or Serviced Land : This land already has important utilities (like electricity, water, sewer, gas, telecommunications, and road access) nearby or already installed. Because it's easier to build on, Lenders may require a slightly lower down payment, usually around 35%. 2. Higher Interest Rates and Shorter Loan Terms Interest rates on land loans are generally higher than on regular home loans because of the increased risk. Also, Lenders might offer shorter loan terms. Some lenders may offer loans where you only pay interest for a few years, which can help lower your monthly payments in the short term. 3. Finding the Right Lender There are three main places to get a land loan: Traditional Banks : Major banks sometimes provide land loans but usually with strict rules, high down payments, and higher interest rates. Credit Unions : Local credit unions can often have more flexible rules and may offer better terms, especially if the land is within their local lending area. Private Lenders : Companies specifically dealing with land financing. They offer customized loans but typically charge fees for borrowing the money and higher interest rates.