Mortgage Insurance: Five Things You Must Know
With the ever increasing taxes, upward home prices, and many expenses that are unforeseen, making a down payment of 20 per cent as a first step towards your new home is a rather uphill task. This is when you rope in a mortgage professional or a lender to help you get the home of your dreams. Insured Mortgages are a good bet for those of you looking to buy a new home.
What is Mortgage Insurance?
Mortgage Insurance is a tool which helps you with cheaper or more affordable options to buy a house. For the uninitiated, Mortgage Insurance is also known as Mortgage default insurance and can come handy if you want to buy a home with a lesser down payment. If you qualify as a borrower then you can get your new home for a down payment as low as 5 per cent with Mortgage Insurance.
What does Mortgage Insurance do?
Mortgage default insurance favours the lender and the investor by protecting them. It is not for the homeowner's protection. In fact it protects the lender and the investor from any losses which may occur if the borrower makes a default and foreclosure. So some may think what does mortgage insurance cost? The cost is dependent on two things i.e. the kind of mortgage that is applied for and the amount towards down payment. Lenders and mortgage professionals can help sort each case individually thereby offering case-specific premium and other benefits.
How does mortgage default insurance affect you?
How much your insurance costs you is based on the amount of the total mortgage. The more you pay towards down payment the less you will have to pay towards mortgage default insurance.
Conventional mortgage vs Mortgage Insurance
You may wonder if all mortgages are insured. This is not the case. Mortgages are insured only if the down payment is less than 20 per cent. If you have paid 20 per cent down payment then you qualify for a conventional mortgage, if not, you will need an insured mortgage.
Mortgage default insurance is not regular insurance
Though, we must warn you that mortgage default insurance is often mistaken for regular insurance. If you know how to differ between the two you can help make guided and knowledgeable decisions before signing on the dotted line and also look for what suits your needs the best. Let us tell you that Home Insurance is to protect the property owner against losses, natural or otherwise such as thefts and other unforeseen events. On the other hand, mortgage default insurance doesn't protect the homeowner but the lender. Mortgage Life Insurance, on the other hand, helps in paying off any outstanding debt towards mortgage payments in case the homeowner passes away or cannot pay the same due to a disability.
This protects the family or dependants of the homeowner from having to pay mortgage debt all of a sudden.
If you have any questions related to mortgage default insurance you can reach out to us.