Hi everyone, Aleem here with the Mortgage Specialist.com. In today’s Mortgage Minutes we’re going to go over the difference between the mortgage insurers.
Now there are actually three insurers. There’s CMHC which is the term that most people use when referring to mortgage insurance. There’s also Genworth as well as Canada Guarantee. At present, Canada Guarantee is only used by a handful of lenders. Why is this significant? Well it is something to keep in mind, as you may be restricted with being able to transfer lenders down the road when your mortgage is up for renewal. We will go over this in more detail in a future episode.
Now the primary difference is that CMHC is government owned, but Genworth is private, so that gives them a lot more flexibility. BUT, because CMHC is backed by the government, most lenders prefer to go with them by default.
For those that aren’t quite sure the purpose of mortgage insurance, well it’s there to protect the bank against any potential loss due to default on your part. The government actually has made it a requirement to have mortgage insurance when you get a mortgage and you’re putting less than 20 percent down. So, it’s there for the protection of the banks interests, but you have to pay the premium.
As mentioned earlier CMHC is backed by the government and will cover 100% of any potential loss, Genworth will cover 90%. This is why every lender uses CMHC, and not every lender uses Genworth, or Canada Guarantee.
So, why is it important that we have options out there? Well, there are Many reasons. But the one that will affect you the most is unauthorized basement suites. If you find a home that has a basement suite and it’s unauthorized or illegal, then CMHC won’t recognize the rental income you can earn from it towards your qualification. So, if you need this income to qualify, then you’re going to have to go to a lender that uses Genworth, and even Canada Guarantee, because they will allow this.
Now is that always the case where Genworth is better? Absolutely not. CMHC is great for the majority of transactions, but having other options there, it keeps CMHC in check. It creates a healthy level of competition in an area where you never want someone to have a monopoly in.
How the others compensate not being backed by the government is providing a little more flexibility and the ability to do those deals that wouldn’t otherwise get done because of the government mandates, but make absolute sense when it comes to seeing it on paper for a lender.
There are a few other advantages of going with Genworth, which I’ve discussed in another video titled “what is CMHC”. Feel free to check it out, or even better give me a call if you would like more details.
For TheMortgagespecialist.com, I’m Aleem Peermohamed
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If you would like more information or a free consultation contact Aleem below, and as a Certified Mortgage Specialist let me help you get the home of your dreams. Great Mortgages, Made Simple