Are You Considering Financing a House Valued Over $1M? Read This First!
When it comes to financing a property over $1 million, understanding the 3 different mortgage categories is crucial. Here’s a breakdown of what you need to know:
Insured Mortgage:
• Down Payment: Less than 20%
• Property Value: Cannot exceed $1 million
• Amortization: Cannot exceed 25 years
• Default Insurance: The premium is paid by the borrower, and rolled into the mortgage
• Rates: Typically the lowest in the market due to the reduced risk – this is what you may see advertised, but watch for the bait and switch tactics!
Insurable Mortgage
• Down Payment: 20% or higher
• Property Value: Cannot exceed $1 million
• Amortization: Cannot exceed 25 years
• Default Insurance: This mortgage is “back-end” insured; therefore the lender pays the insurance premium for the borrower
• Rates: Very competitive, and they tend to decrease as the down payment increases
Uninsurable Mortgage
• Down Payment: 20% or higher
• Property Value: Applies to properties over $1 million
• Amortization: Can exceed 25 years, increase to rate may apply with some lenders
• Default Insurance: NONE required
• Rates: Typically 10-20 basis points higher than insured; however they also decrease as the down payment increases.
In Summary:
• Insured and Insurable Mortgages: These offer more protection for the lenders, therefore better rates are extended to the borrower.
• Uninsurable Mortgages: Higher rates due to risk pricing and no insurance; however we see more underwriting flexibility, exceptions and higher approval amounts as the lenders are not tied to Insurer guidelines
• Upcoming Changes: Starting August 2024, a new ruling will allow Lenders to offer 30-year amortization for First-time Buyers of NEW builds, impacting insured and insurable mortgages only. Stay tuned for more info on this!
For expert guidance on navigating your mortgage options or a quick rate quote, please contact Janette Roch for a no-fee, no-obligation mortgage consultation at 250-588-1919 or rochmortgage@gmail.com.