Not all insurance products are created equal. One of the most common mistakes homeowners and potential homeowners make is that they hear the word “insurance” and just assume they have it! Well, you might have one kind of insurance, but you might be missing coverage elsewhere. It is important to understand all the different insurance products to ensure you have proper coverage.

To help you get a better understanding of the insurance, below are the four main insurance product options you will encounter and what they mean:

Default Insurance: This insurance is mandatory for homes where the buyer puts less than 20% down. In fact, default insurance is the reason that lenders accept lower down payments, such as 5% minimum, and actually helps these buyers access comparable interest rates typically offered with larger down payments.

Default insurance typically requires a premium, which is based on the loan-to-value ratio (mortgage loan amount divided by the purchase price). This premium can be paid in a single lump sum, or it can be added to your mortgage and included in your monthly payments.

In Canada, most homeowners know of the Canada Mortgage and Housing Corporation (CMHC), which is run by the federal government, and have used them in the past. But did you know? We also have two private companies, Sagen Financial and Canada Guaranty, who can also provide this insurance.

Home (Property & Fire) Insurance: Next, we have another mandatory insurance option, property and fire coverage (or, home insurance, as most people know it by). This is number two on our list as it MUST be in place before you close the mortgage! It is especially important to note that not all homes or properties are insurable, so you will want to review this sooner rather than later.

In addition to protecting against fire damage, home insurance can also cover the contents of your home (depending on your policy). This is important for anyone looking at purchasing condos or townhouses as the strata insurance typically protects the building itself and common areas, as well as your suit “as is”, but it will not account for your personal belongings or any upgrades you made. Be sure to cross-check your strata insurance policy and take out an individual one on your unit to cover the difference.

One final thing to consider is that you may not be covered in the event of a flood or earthquake. You may need to purchase additional coverage to be protected from a natural disaster, depending on your location.

Title Insurance: Another insurance policy that potential homeowners may encounter is known as “title insurance”. When it comes to lenders, this insurance is mandatory with every single lender in Canada requiring you to purchase title insurance on their behalf.

In addition, you have the option of purchasing this for yourself as a homeowner. The benefit of title insurance is that it can protect you from existing liens on the property’s title, but the most common benefit is protection against title fraud. Title fraud typically involves someone using stolen personal information, or forged documents to transfer your home’s title to him or herself – without your knowledge.

Similar to default insurance, title insurance is charged as a one-time fee or a premium with the cost based on the value of your property.

Mortgage Protection Plan: Lastly, we have our mortgage protection plan coverage. This is optional coverage, but one that any agent can tell you is extremely important. The purpose of the mortgage protection plan is to protect you, and your family, should something happen. It acts as a disability and a life insurance policy in regards to your mortgage.

Typically, when you get approval for a mortgage, it is based on family income. If one of the partners in the mortgage is no longer able to contribute due to disability or death, a mortgage protection plan gives you protection for your mortgage payments.

If you have any questions about mortgage insurance or what are the best options for you, please do not hesitate to reach out to a Dominion Lending Centres mortgage expert for professional advice! They can take a look at your existing plan and discuss your needs to help you find the perfect coverage to suit you and your family.

Published by DLC Marketing Team

Today, the Bank of Canada increased its overnight benchmark interest rate 75 basis point to 3.25% from 2.50% in July. This is the fifth time this year that the Bank has tightened money supply to combat inflation. While the latest increase was comparatively smaller than the move made in July (100 basis points), it is bigger than the changes made in March (+0.25%), April (+0.50%) and June (+0.50%).

Moreover, the Bank stated it is not finished hiking its policy interest rate just yet and noted that central banks around the world also “continue to tighten monetary policy.”

These are the highlights of today’s announcement.

Inflation at home and abroad 

•  In Canada, CPI inflation eased in July to 7.6% from 8.1% because of a drop in gasoline prices;  however, inflation (excluding gasoline) increased and data indicate a “further broadening of price pressures,” particularly in services
• The Bank’s core measures of inflation continued to move up, ranging from 5% to 5.5% in July
• Surveys suggest that short-term inflation expectations remain high domestically and “the longer this continues, the greater the risk that elevated inflation becomes entrenched”
• Global inflation remains high and measures of core inflation are moving up in most countries

Economic performance at home and abroad

• The Canadian economy continues to operate with excess demand and domestic labour markets remain “tight”
• Canada’s GDP grew by 3.3% in the second quarter – somewhat weaker than the Bank had projected – but indicators of domestic demand were very strong
• Canadian consumption grew by approximately 9.5% and domestic business investment was up by almost 12%
• Commodity prices have been volatile: oil, wheat and lumber prices have moderated while natural gas prices have risen
• Economic activity in the United States has moderated, although the U.S. labour market also remains tight
• China is facing ongoing challenges from COVID shutdowns

Canadian housing market

• With higher mortgage rates, the housing market is pulling back “as anticipated” following “unsustainable growth during the pandemic”

Looking ahead

The Bank expects the Canadian economy to “moderate” in the last half of 2022 as global demand weakens and tighter monetary policy begins to bring demand more in line with supply.

However, given the outlook for inflation, the Bank’s Governing Council continues to note that its policy interest rate will “need to rise further.”

To underscore its current thinking, the Bank wrote that it remains “resolute” in its commitment to price stability and will continue to take action as required to achieve a 2% inflation target.

On the bright side, the Bank offered that as the effects of tighter monetary policy work through the economy, it “will be assessing how much higher interest rates need to go to return inflation to target.”

October 26, 2022 is the BoC’s next policy announcement date at which time it will also make its fourth Monetary Policy Report of the year available for review.

Published by First National Financial LP