Will Mortgage Insurance Help Us In These Times?

My wife and I were going to buy a house downtown this summer. Both of us are working and have a good credit score, no pending mortgages and, our annual income falls in the range of $60,000. We had a possible buyer for our current house, who had agreed on a reasonable price for our home. We thought using that as the downpayment for the new home. To be on the safe side, we also had plans to secure our mortgage with mortgage insurance, as suggested by our mortgage broker. Using a mortgage insurance calculator they showed how less a burden wold this mortgage be. Now due to the current situation, my wife lost her job; mine is too not secure! We won’t be able to put down 20%. In that case, if we buy a new house, will the mortgage insurance hold up even if we lose our jobs. I am not sure how real estate prices would change. Is buying a home using a mortgage worth at all? What are your thoughts?

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Possibly you’re talking about a different kind of mortgage insurance in which case what I’m about to say doesn’t apply, but at least in the US the standard mortgage insurance protects the lender, not the borrower. It’ll do nothing for your family if lose your job/can’t pay the mortgage on time, it just means that the lender will still get some money coming in until you either come current or they foreclose and recoup their money that way (what money the mortgage insurance pays does not count towards your payments, you still owe what you signed for for the loan). They’ll let you take out more of a mortgage/the same mortgage with less downpayment if you include mortgage insurance because it’s a guarantee for them of at least some of the money, but again it protects them not you.

Personally I wouldn’t do a house with no mortgage (the rates are extremely good right now, although I know the peace of mind of not having a monthly mortgage payment/owing money in general is worth it for some people), but I’d definitely do the 20% down if possible to avoid mortgage insurance. Especially if it’s not the kind that immediately falls off once you’re at 80% loan-to-value and you have to refinance to get rid of it.

In your case…honestly, with your wife having lost her job and yours not secure, the timing seems maybe not the best for buying a new house.

ETA–just saw your link was for Canada, but Google says it’s the same kind of thing for mortgage insurance. It protects the lender, not the borrower.