17 Mar Why You Need Mortgage Insurance -Lender
Why You Need Mortgage Insurance
Buying a home is one of the most important decisions you’ll ever make. That’s why it’s so important to get it right. Whether you’re a first-time homebuyer or not, there are plenty of things to think about when you’re getting ready to purchase your dream house. One thing that often gets overlooked is mortgage insurance. A lot of people don’t know much about what it is, but here are some things you need to know about mortgage insurance before deciding whether or not to add it to your loan.
What is mortgage insurance?
Mortgage insurance is a type of insurance that protects the lender, not the borrower. It’s designed to protect the lender if the borrower defaults on their mortgage by providing funds to make sure they get paid back. In most cases, mortgage insurance only protects you if your down payment is less than 20 percent of the home price or less.
How does it work?
Mortgage insurance protects you if you’re unable to make your house payments. In the event that you become unemployed, or your income and expenses change, and you aren’t able to keep up with your mortgage repayments, it’s possible that the bank can take over your home.
Why should you have it?
Mortgage insurance is a way to protect the lender from a loan default. If you were to default on your home loan, the lender would need to cover the difference between what you owe and what your house is worth. Without mortgage insurance, lenders could be out of pocket for large sums of money. But with mortgage insurance, they are protected against this risk.
If you’re buying a home with someone else, you’ll need mortgage insurance. When two people buy a house together and only one person has good credit, then both parties will need mortgage insurance because one party can’t guarantee the other’s debt. Mortgage insurance also protects against fluctuations in interest rates or in property values that may cause your monthly payments to rise or fall by more than 10 percent in five years’ time.
How much will it cost?
Mortgage insurance is a lot like life insurance, with the exception that it’s designed for your home. You can’t see it or feel it, but mortgage insurance protects you from being in debt should your home be lost to a disaster such as fire or flood.
Mortgage insurance premiums are usually around 0.5% of the loan value, meaning if you’re borrowing $200,000 on a 30-year mortgage, then you’ll pay about $1,000 per year in mortgage insurance premiums.
You’ve found the perfect home and you finally got approved to buy it. Congratulations! Now you’ll want to make sure you have the right type of mortgage insurance to protect you in the event that something happens to your home.
Take a look at the six reasons why you need mortgage insurance here and make sure you ask about it when applying for your loan. It will be one less thing to worry about!
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