FAQ Mortgage Insurance

If you’re getting a conventional mortgage and your down payment is less than 20%, you’ll likely have to pay for PMI. But if you’re able to put at least 20% down, you can avoid mortgage insurance.For FHA loans, mortgage insurance is unavoidable.

Bank mortgage insurance usually names the bank as beneficiary, the coverage shrinks as your mortgage balance goes down while the premium often stays the same, and it ends if you switch lenders. Personal term life insurance pays your family, who decide how to use the money, the coverage stays level, and it stays with you if you move or change lenders. For many families, term life gives more protection for a similar or lower cost.

No. CMHC (mortgage default) insurance is required when your down payment is less than 20%, and it protects the lender if you stop making payments. Mortgage protection or life insurance protects your family by paying off the mortgage if you pass away, and some plans also cover critical illness or disability.

You might have to pay both mortgage insurance and homeowners insurance—but while they might sound similar, they’re actually quite different.Mortgage insurance: protects the lender if a borrower defaults on their loan.Homeowners insurance: protects the homeowner in case of damage to your house or belongings.

At minimum, enough to pay off your mortgage balance. Many families add more to cover other debts, a few years of living costs and future education. Choose a term that lasts at least as long as your remaining amortization, for example 20 or 25 years.

Mortgage insurance is based on your loan amount. To estimate how much you’ll pay for mortgage insurance, you’ll first need to calculate your loan-to-value (LTV) ratio. To do this, divide your loan amount by your property value. You’ll then multiply this by your PMI percentage, which your lender can provide.PMI percentages can range from 0.22% on the low end up to 2.25% on the high end—you can use these percentages if you don’t have your PMI percentage from your lender.

Yes. You can buy a joint first-to-die policy that pays when the first spouse passes away, or two individual policies. Two individual policies cost a little more but pay out twice if both spouses pass away, and each person keeps their own coverage if the relationship changes.

Bank mortgage insurance usually ends when you move your mortgage to another lender, and you may have to re-qualify at an older age and higher price. A personal term life policy stays in force no matter which lender you use, so your coverage and price do not change.

Generally no. In Canada, premiums for mortgage life insurance on your own home are not tax-deductible, and the benefit is paid to the lender. There can be exceptions, for example when a policy is required as collateral for a business or rental property loan, so ask a tax professional about your situation.