Insured, Insurable, And Uninsured Mortgages

MORTGAGE RENEWAL RATES: RANGES

If you’re using Google to shop mortgage interest rates you will see many rates with differences ranging from 0.20% to as high as 0.45%, or even higher.

Banks offer various rates based on the type of mortgage meaning insured, uninsured, or insurable. Today, we are seeing the best rates available for insured mortgages. Seems a little confusing.

LET’S EXPLAIN

What is an insured mortgage ? Insured mortgages, sometimes referred to a high ratio mortgages, are secured with less than 20% down payment. Mortgage default insurance is added into the total mortgage amount protecting the lender for the life of the mortgage.

Mortgage default insurance is an insurance policy that protects against the borrower defaulting on the loan thereby providing the lender with security to offer lower rates. If your mortgage was originally insured, and you have not made any changes, then we can look at obtaining the lower, insured rate.

UNINSURABLE MORTGAGES

If your mortgage was initially insured but you took on mortgage refinancing along the way, then the mortgage becomes uninsurable. This is because the refinanced mortgage is technically a new mortgage with a new payment plan.

Uninsurable mortgages might include rental properties and mortgages over 25 years initial amortization.

ADD TO THE MIX, INSURABLE MORTGAGES

An insurable mortgage will have a better rate than an uninsured mortgage. An insurable mortgage is insured at the lender’s expense, with a maximum amortization of 25 years.

Insurable mortgage rates will vary depending on the loan amount and property value.

WHY THE DIFFERENCE?

Two reasons. First, in the spring of 2017 we saw an increase to mortgage default insurance premiums.

Second, higher interest rates on conventional mortgages could be interpreted as the lenders building in their own insurance, thus minimizing their exposure to risk.

To combat this practice, in the fall of 2017 changes were implemented by the Office of the Superintendent of Financial Institutions (OSFI) preventing lenders from purchasing insurance on conventionally funded mortgages.

In a nutshell, if you have an insured mortgage you will see the best rates offered. Insurable mortgages, are a little higher but still lower than uninsured rates.

IS IT MORTGAGE RENEWAL TIME?

As every mortgage is unique to your financial circumstance and goals, we believe when it’s mortgage renewal time it is important to evaluate your financial situation so you secure the best mortgage to meet your requirements.

Is your lower mainland mortgage renewal approaching? Give us a call today to book a time to review your mortgage renewal rate options

I’m always happy to schedule an in-person meeting or phone call if you have any questions or concerns.
Jaret Forman
Surrey / Langley Mortgage Broker

604-816-5988

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