subject: Insight On Mortgage Insurance [print this page] Mortgage companies depend on mortgage insurance in order to safeguard themselves from defaulting mortgage borrowers. In case a mortgage buyer finds they are unable to make the payments, then the insurance company pays to the mortgage company. Mortgage companies buy their insurance from insurance providers and pay premiums on the same. These premiums are then passed on to the buyers of the mortgage. They may have to pay for the premiums on an annual, monthly or single-time basis. The insurance payments are added to the monthly payments of the mortgages. Mortgage insurance policies are also known as Private Mortgage Insurance or Lender's Mortgage Insurance.
Usually, mortgage companies need to be insured for all mortgages that are above 80% of the total property value. If the mortgage buyer makes a down payment of at least 20% of the mortgage value, then the company may not require an insurance policy. But on an average basis, most of the mortgage buyers cannot afford to pay 20% of the down payment, and hence most mortgage companies require insurance, and these insurance premiums increase the monthly payments of the borrowers.
Thus, the mortgage lenders get to choose their insurance providers, but the borrowers of the mortgage are obliged to pay the premiums. This is where the controversy against mortgage insurance begins. But paying a mortgage premium allows the mortgage buyer to be able to buy the house sooner. This also increases the cost of the house and enables the person to upgrade to a more expensive house sooner than expected.
Both government and private financial institutions can provide mortgage insurance. The premiums payable on mortgage insurance is mainly dependent on the purpose for which the borrower is buying the mortgage. In general, mortgage premiums on housing are higher than for other purposes.
Mortgage insurance cover is valuable in its sense for being available to protect your home in the event of number of eventualities. Your home could bear many risks throughout the term of the mortgage and various reasons could result in you losing the property due to any unforeseen circumstances. With the right level of mortgage insurance protection you and your loved ones can enjoy the peace of mind that you mortgage repayments and your home will be protected should you find yourself in one of a range of difficult situations.
With mortgage insurance protection you can enjoy complete relaxation that in the event that you are unable to work for a period of time due to redundancy or due to sickness or injury, you will have to cope up with the added worry of the repayments on your mortgage. This also enables you to enjoy the added peace of mind that in the event that you die during the term of the mortgage your mortgage will be paid off, which means that your loved ones will not have the added worry and burden of losing the family home at a time such that will already be stressful and traumatic for them.
by: Rachel Hammons
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