Insurance costs when you put 20% down?

[loewencc]

wondering if there is still an insurance fee when you put 20% down on a rental property?
I always thought you avoid those fees when you put the 25% and now 20% down initially.
But my broker is telling me there is still an amount... less than high ratio, but still a fee because it is a revenue property.
any feedback would be great!

 

[PeterKinchMortgageTeam]

QUOTE (loewencc @ Jul 28 2008, 11:50 AM) wondering if there is still an insurance fee when you put 20% down on a rental property?
I always thought you avoid those fees when you put the 25% and now 20% down initially.
But my broker is telling me there is still an amount... less than high ratio, but still a fee because it is a revenue property.
any feedback would be great!


If yours is a fully qualified deal, you should be able to get discounted rates without insurance. However, it depends on alot of factors including the property. If the lender is a little uncomfortable with the property for whatever reason, they may still be willing to lend but would want it insured. The simple fact that its a revenue property, would NOT require insurance!

There may be other reasons though. Feel free to drop me a note - I can get additional details from you and be able to get you a more definitive answer.

Hope that helps,

 

[loewencc]

This is what my broker just sent me when I asked for more clarification:

When you purchase a rental property, there is still an insurance fee on all loan amounts. The break down is as follows…



Up to 65% LTV 1.25%

65.01% - 75% 1.75%

75.01% - 80% 2.5% + 0.6% = 3.1%

80.01% - 85% 3.5%

85.01% - 90% 4.75%

***there is a 0.2% premium charge for every 5 years over and above 25 year amortization; therefore 40 year am = 0.6% added to the fee***



There is no way to avoid an insurance premium if you are purchasing a rental property. The 3 insurers of Canada (Genworth, CMHC or AIG) charge this insurance fee depending on the Lender that we submit to.

 

[GarthChapman]

Refer to Peter Kinch`s reply above "The simple fact that its a revenue property would NOT require insurance!"

Either the Lender has some concerns about the property itself or you as a borrower, or your Mortgage Broker is not fully conversant in this type of lending.

Get a 2nd opinion from an experienced Mortgage Broker.

 

[PeterKinchMortgageTeam]

QUOTE (GarthChapman @ Jul 28 2008, 12:33 PM) Refer to Peter Kinch`s reply above "The simple fact that its a revenue property would NOT require insurance!"

Either the Lender has some concerns about the property itself or you as a borrower, or your Mortgage Broker is not fully conversant in this type of lending.

Get a 2nd opinion from an experienced Mortgage Broker.

Thanks Garth. That`s correct. A fully qualified, straightforward application with 20% down DOES NOT require insurance. Talk to another broker who is more familiar with revenue property financing before committing to any financing with an insurance premium.

 

[mortgageman]

There are lenders who will require insurance even with 20 percent down IF you push the amortization beyond 25 years.
First National is one example

 

[loewencc]

Does this make First National a less than desirable lender??