Quote:

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Originally posted by bison

Thanks for a nice explanation Rajeev...

Tho, I am looking for a specific answer here (Hope i am making sense here and am not offtrack)

a) If you already have your own personal life policy + group term, and
b) the total face value of these two policies is greater than the cost of the house, and
c) You are buying a house with a high ratio mortgate

Are you still required to buy the "mortgage DEFAULT insurance cover" ?
or
Because you already have life insurance policies that values more than the cost of the house, you dont "HAVE TO" take this "mortgage DEFAULT insurance cover" ?

Trying to see if a "mortgage DEFAULT insurance cover" can be avoided for a high ratio mortgage


Thanks, bison

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Rajeev Narula, Broker, REALTOR®
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Quote:

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Originally posted by Rajeev Narula



Pramodji has given a good explanation to your question. I only want to add the following comment to your above question:

You are assuming that the only time there is a likelyhood of mortgage default is when you are no more since that is the only time when your insurances will pay-out. There may be situations beyond one's control in life (when you are still alive and kicking) when you may not be able to pay the mortgage. Mortgage Default Insurance is a remedy for the banks to recover thier bad debts in such instances. Hope this helped.

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deleted...


duplicate post. sorry....

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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada

Thanks Pramodji and Rajeev.

That explains...

I had confused the mortgage default insurance with the mortgage life insurance.

Thanks, bison

Alright, digging this a bit further:

So now, for a 320,000 house, if a person pays lets say 10 % downpayment (32,000), what would be the cost of mortgage default insurance ? On what parameters does it depend upon? Can you be required to submit a medical evidence of insurability for this mortgage defaut insurance?

Is there any legal requirement to have a mortgage life insurance? I am now assuming that if you have your own personal life insurance - than you wont be required to take a mortgage life insurance? Is that correct?


Thanks, bison

At 90% of home value the mortgage loan insurance (MLI) is 2.0%.

In your concrete case: $320,000 - $32,000 = $288,000.

The MLI is 2% of $288,000 or $5,760. If you do not have this amount readily available you can add it to the mortgage loan and the bank will advance you $293,760 ($288,000 + $5,760)and you can pay it off in 25 years or whatever term you have applied for the mortgage. Alternatively you can ask the bank for a line of credit and pay it off faster. Also loans for this are available, which can be paid back in 6 months, 1 year or 3 years etc.

Here is a link for the rates:

http://www.cmhc.ca/en/co/moloin/moloin_005.cfm

No medical evidence of insurability is required for the MLI.


In reply to your specific question, no, it is not necessary to go for a mortgage life insurance if you have your personal life insurance.It's advisable to ensure your life insurance will cover the mortgage should anything happen to you plus support your spouse, children, parents.

Just a footnote here. It is NOT NECESSARY to go for a mortgage life insurance if you don't have a life insurance, though it is highly advisable. The personal life insurance is a better route.

Many thanks investpro!!! That clears it up...

Thanks once again to Pramodji, Rajeev and investpro

bison