Mortgage Insurance or Life Insurance?

For many Canadians buying a home is the single largest investment in their lifetime.

You’re excited and stressed – not only because of the financial commitment, but because it’s about a place and a community that you have set your heart on. It is during this emotional time you will meet with a lender to arrange the mortgage and you will also be asked to purchase Mortgage Insurance. If you’re like many people, you may have overlooked insurance in the home buying process.

Buying a home is an exciting time! Buy ensure you are making an informed decisions about protecting your investment, and your future. So what is the difference between Mortgage Insurance and Life Insurance?

Mortgage Insurance	Life Insurance
Also known as mortgage life, or creditor insurance, it is a policy sold by the mortgage lenders (such as banks) to pay off the mortgage in case of death with policy proceeds going directly to the lender.	An individual owned policy designed to provide coverage amounts and terms for the period of time you need it the most with policy proceeds going directly to your beneficiaries.
Mortgage/Creditor Insurance	Term Life Insurance
Lender is both the policyholder and principle beneficiary	You are the policy owner and choose the beneficiary
Death benefits go to the mortgage lender	Death benefits go to your designated beneficiary who can use the funds as needed
Coverage amount is typically determined by the size of your mortgage only	Coverage amount is determined by you based on a complete needs analysis
Coverage decreases as you pay off your mortgage	Coverage remains the same for the duration of policy
Policy ends when mortgage is paid off	Policy in good standing remains in force for duration of policy term chosen
Selling your home to buy another you must purchase and qualify for a new policy	Policy is portable and remains with you
If you change lenders, you must reapply and risk being declined	Policy is portable and remains with you
Underwriting is usually done after a claim, payouts can be declined for poor health after policy is issued	Underwriting and evaluation of medical history is done prior to policy being issued and won’t be canceled later if health issues arise
Payment of monthly premiums begins before you have been approved for a policy	Monthly premiums don’t start until after you have been approved for a policy
Policy is typically based on age and mortgage, no discounts for excellent health	Preferred rates are available for individuals with excellent health

Prepare your Paperwork

Process your mortgage with ease by preparing the documentation you’ll need before sitting down with your mortgage broker.

WHAT YOU’LL NEED:

Information about the property you’re buying:
Purchase and Sale Agreement
MLS® Listing with photo
Name, address, and telephone number of your solicitor/buyer

Confirmation of your down payment:
Saving or investments statement from within the last 90 days
Sale of an existing property – a copy of the sale agreement
Gift Letter
Withdrawal from RRSP through Home Buyer’s Plan

Verification of Employment
Most recent pay slip
T4
Letter of Employment
T1 General Notice of Assessment (if self-employed)

ALREADY OWN A HOME?

Information about your existing property:
Recent mortgage statement
Current Homeowner insurance policy
Most recent property tax/bill statement
Legal description of your property (this can be found on your original purchase agreement or your property tax statement)

Other information you may need:
Current assets
Projected expenses related to the property (heating costs, condo fees, taxes)
Whether you will be using the property to generate income
Void cheque

Mortgage Insurance vs. Life Insurance