Search results

Wednesday, 14 January 2015

Mortgage insurance

Mortgage insurance

Mortgage Insurance is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Unfortunately, the need to pay your mortgage doesn't end in the event that the unexpected happens, which is why it’s best to take out mortgage insurance to cover the cost in the event of an accident, sickness or unemployment.

For a monthly premium, a mortgage insurance policy will pay you a set amount each month when you are unable to work because of accident, sickness or unemployment. The basic mortgage insurance will cover a period of 12 or 24 months, since it is only for a limited period, it may not be the best form of mortgage insurance for you.

There are a range of mortgage insurance policy options available to suit your needs:
  • You may choose a policy which only covers accident and sickness or for unemployment. If you do not need full protection, this could lower the cost of your monthly premiums.
  • You may choose a policy which enables you to decide much you would like it to pay out each month.
  • You may choose a policy which will also cover other monthly bills as well as your mortgage.
There are two different types of mortgage options available:
  • Fixed rate – it carries the lowest risk and offers a good deal when interest rates are low.
  • Adjustable rate – costs less but can become expensive if interest rates rise substantially.
There are now many mortgage insurance options available which combine aspects of both fixed-rate and adjustable loans. Your mortgage can start off as a fixed-rate and then change to an adjustable after several years.

When you are buying a house, Mortgage insurance is required on loans with low down payments. If you make a down payment of less than 20% when buying a home, the lender will require you to take out a mortgage insurance. You can drop the mortgage insurance when your home equity is more than 20%, which can be done by making extra payments, home improvements and appreciation.

No comments:

Post a Comment