Sagen Mortgage Insurance Company Canada review 2024
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Did you know that a study conducted by Sagen Mortgage Insurance Company in 2023 found that the general population of Canada’s intention to buy a house is at an all-time low? It found that one of the major reasons people are delaying their house purchase is simply because they can’t afford to buy property.
This is where Sagen mortgage insurance steps in. It makes homeownership accessible and affordable by providing default insurance to help you buy your dream home with a down payment of as little as 5%.
But how does Sagen mortgage insurance work and what does it cost? This article acts as a comprehensive guide for anyone interested in Sagen mortgage insurance.
Sagen Mortgage Insurance: 4 Key Takeaways
- Sagen enables individuals to become homeowners with as little as 5% down
- Sagen mortgage insurance premiums range from 0.60% to 4%
- Interest and sales tax may apply to your default insurance depending on where you live
- Sagen offers multiple products covering most home-buying needs
Our Sagen mortgage insurance review: Trustworthy and value for money
Sagen mortgage insurance is one of the best default insurance plans in Canada, and Sagen itself is the largest provider of default mortgage insurance in Canada. Sagen mortgage insurance is a suitable option for any home buyer purchasing a property with a down payment ranging from 5-20% of the property price.
Unfortunately, since the default insurance provider of a mortgage is chosen by the lender and not the borrower, there is no guarantee that the buyer will end up with Sagen mortgage insurance.
Expert advice
Remember that Sagen mortgage insurance does not cover you, the home buyer, at all. It is simply an extra layer of insurance that protects the lender if you cannot pay your mortgage. Unlike mortgage protection insurance like Canada Life mortgage insurance or Cumis insurance, the policy does not replace your mortgage repayments or help you if you are at risk of defaulting on your mortgage.
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Pros of Sagen Mortgage Insurance
- Provides accessibility to housing for individuals who only have a down payment between 5% to 20% of purchase price.
- It can be paid in full or spread out over the lifetime of the mortgage
- Default insurance provides market stability by offering a guarantee to lenders
- Promotes competitive interest rates on mortgages through government regulation
- Insurance premiums are fixed and aren’t affected by your circumstances
Cons of Sagen Mortgage Insurance
- Mandatory default insurance is an additional cost for home buyers
- If added to the mortgage itself, Sagen mortgage insurance will accrue interest over time increasing the overall purchase cost of the property
- Default insurance premiums are non-refundable
- Coverage is only afforded to the lender and not the borrower
What is Sagen mortgage insurance?
Sagen mortgage insurance is default insurance that provides mortgage lenders coverage if homebuyers default on their loans. It is provided by Sagen Insurance Company previously known as Genworth Canada. It rebranded to its current name in October 2020.
As Canada’s largest default insurance provider, Sagen offers a diverse range of solutions to lenders and brokers, while staying at the forefront of excellence by working with regulators for communities throughout Canada.
Sagen provides the mandatory safety net for lenders on behalf of home buyers who have a 20% down payment or less on any property that they purchase. The purpose of this default insurance is to stabilize the Canadian housing market, keep interest rates low, and increase accessibility to homeownership.
Good to know
CMHC mortgage insurance is another option for homeowners making a down payment of less than 20% on their mortgage. Read our complete guide on CMHC mortgage insurance to understand how it works. Mortgage loan insurance is required for high-ratio mortgages — those with less than a 20% down payment. But you only need coverage from one insurer, not multiple.
How does Sagen mortgage insurance work?
Sagen mortgage insurance works by providing mortgage lenders with financial security if a homeowner can no longer pay their financial mortgage obligations. By having the guarantee that mortgages are covered by default insurance, lenders can provide reasonable mortgage rates to individuals who can’t afford large down payments on property.
Mortgage default insurance is a legal requirement by the Canadian government to protect lenders and the national economy as a whole. If a borrower is unable to continue their financial obligations to the lender and defaults on their loan, the lender can claim against Sagen and the buyer could end up losing their house.
Since Sagen mortgage insurance is government-mandated, both the lender and future homeowner have to abide by the minimum down payment rules. These are:
- For any house purchase up to the value of $500,000, the borrower must provide a minimum down payment of 5%.
- Where a property is between $500,000 and $999,999, a minimum down payment of 5% is necessary on the first $500,000, and a 10% down payment on the portion of the property valued above $500,000.
- Properties valued over $1,000,000 are not eligible for the Sagen Mortgage Insurance Company Canada plan.
Example 1
If you buy a property that is $400,000 you have to put a minimum $20,000 up as a down payment, which is equal to 5% of the purchase price.
Example 2
When buying a property worth $600,000, you will have to place a minimum down payment of $35,000 towards the mortgage. This is 5% of the first $500,000 of the property value, in addition to 10% of the remaining $100,000 of the property value.
What does Sagen mortgage insurance cost in 2024?
Just like all default insurance, Sagen mortgage insurance premiums are based on a specific premium rate. It is dictated by the loan-to-value (LTV) ratio of the mortgage and applied to the mortgage value. The rates vary from 0.60% to 4%, depending on the LTV. See the premium table below.
| Loan-to-value (LTV) ratio | Sagen mortgage insurance premium rate |
|---|---|
| Up to 65% | 0.60% |
| 65% to 75% | 1.70% |
| 75% to 80% | 2.40% |
| 80% to 85% | 2.80% |
| 85% to 90% | 3.10% |
| 90% to 95% | 4.00% |
Example 1: Mortgage premium calculation with 5% down
When purchasing a home that is $400,000 with a $20,000, 5%, down payment, your Sagen mortgage insurance premium is equal to 4% of the remaining mortgage value ($380,000) which totals $15,200.
Example 2: Mortgage premium calculation with 12% down
If, however, you purchase the same $400,000 home with a $48,000 (12%) downpayment, the premium rate will drop to 3.10% of the outstanding loan ($352,000) and your policy cost will drop to $10,912.
Interest and sales tax
Your Sagen mortgage insurance premiums may also come with hidden costs: interest rates and sales tax.
Interest will accrue on your default insurance if the premium is not paid in full. This is because the premium will then be added to your outstanding mortgage and interest will be applied at the same rate as your loan.
Provincial sales tax will also apply to your Sagen mortgage insurance premiums if the property is in Saskatchewan, Ontario or Quebec.
SAVE BIG: 25% Sagen mortgage insurance discount
You can lower your default insurance costs if your house is considered energy-efficient or if you renovate the property according to energy-efficiency guidelines. The refund on your mortgage insurance premiums can be up to 25%.
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What products does Sagen mortgage insurance offer?
Sagen offers lenders and brokers a vast range of mortgage insurance products that cater towards the specific needs of consumers. From the basic government-mandated homebuyer program to investment property, family plans, and second property Sagen mortgage insurance.
| Sagen Mortgage Insurance Product | What It Covers |
|---|---|
| Homebuyer 95 | Allows home buyers to purchase property with as little as a 5% down payment |
| New To Canada | Helps recently immigrated individuals get on the property ladder with as little as a 5% down payment |
| Investment Property | Provides eligible customers the opportunity to buy an investment property with as little as 20% down |
| Family Plan | Allows customers to buy property for immediate family who may not be eligible themselves due to poor credit |
| Secondary Home | Helps eligible homeowners to buy a secondary home for themselves or their family members with just 5% down |
| Self-Directed RRSP | Consumers with RRSPs and RRIFs can direct their savings towards Sagen mortgage insurance |
| Borrowed Down Payment | Lets eligible borrowers contribute to their down payment from the likes of personal loans, lines of credit and credit cards |
| Second Mortgage | Allows borrowers to combine their first and second mortgage up to 95% of the LTV |
| Portability Feature | Lets Sagen insured customers port their mortgage default insurance to a new home |
| Purchase Plus Improvements | Qualified home owners can roll improvement costs into their Sagen mortgage insurance with as little as 5% down |
| First Time Home Buyer | This First Time Home Buyer incentive provides 5 or 10% to first time home buyers to put towards their first home |
Can you cancel your Sagen mortgage insurance?
You cannot cancel your Sagen mortgage insurance once you purchase the property. It is a government-mandated insurance policy that is part of the closing costs on your home.
Furthermore, if the default insurance is added to your mortgage and paid off over time, you will have to pay the remainder of the insurance premium if you sell your property.
However, existing policyholders may be able to port their default premiums to a new home. Speak to your Sagen representative to discuss porting possibilities.
