What You Need To Know
What is Mortgage Loan Insurance?
Mortgage Loan Insurance (also referred to as “Default Insurance”) protects lenders such as Canadian Western Bank (CWB) and Canadian Western Trust (CWT) from loss due to borrower default on a mortgage. Default Insurance provides a necessary safety net to the financial system, helping to ensure the availability of mortgage funding during times of recession and economic downturns.
Banking laws require Default Insurance when the down payment is smaller than 20% of the lesser of the purchase price or the appraised value of the property. Even when down payments are 20% or larger, lenders may still require Default Insurance due to individual borrowing circumstances, such as property location or property type.
Who pays the Default Insurance premium?
The borrower pays the insurance premium. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.
How do consumers benefit?
Consumers can become home owners sooner. Default Insurance enables consumers to borrow from us to purchase homes with a down payment as low as 5%, at interest rates comparable to mortgages with a 20% down payment.
How do CWB and CWT benefit?
Default Insurance helps to protect CWB and CWT against loss as a result of a mortgage default, and allows us to offer mortgages with down payments of less than 20%.
This insurance reduces the risk of loss, allowing us to offer borrowers (like you) mortgages at much lower interest rates and with smaller down payments than would otherwise be required. CWB and CWT receive no payments or benefits other than payment received by us in respect of a claim made by us under the Default Insurance.
How much does Default Insurance cost?
Default Insurance is calculated as a percentage of the mortgage amount and is based on the size of the down payment and the amortization period.
The following table lists the standard premiums, which are subject to change.
|Loan to Value Ratio||Standard Premium|
|Up to and including 65%||0.50%|
|Up to and including 75%||0.65%|
|Up to and including 80%||1.00%|
|Up to and including 85%||1.75%|
|Up to and including 90%||2.00%|
|Up to and including 95%||2.75%|
- For amortization periods greater than 25 years, up to and including 30 years: 0.20% surcharge.
- For amortization periods greater than 30 years, up to and including 35 years: 0.40% surcharge.
For more information on Default Insurance, please contact the Branch or Office where you do business.