Knowing About Mortgage Insurance


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Knowing About Mortgage Insurance

  1. 1. Knowing About Mortgage InsuranceThe mortgage market has grown in leaps and bounds over the last two decades and so has themarket; whose main consumers are the people in the housing industry. There are two main types ofmortgage insurance; mortgage life insurance and private mortgage insurance. The latter is mandatoryand is part of most mortgage deals. Many times private dealers ensure that private insurance is partof the mortgage and it has been made part of the mortgage legislation in many places in the union.Mortgage life insurance is not mandatory and is taken by people who want to ensure that the housethey are paying for remains in the hands of their descendants in case of their death or disability.The purpose of mortgage insurance is to ensure that there is no foreclosure on the house in case theborrower fails to pay the mortgage according to the terms and conditions of the mortgage. Most of thetime, private mortgage insurance includes the monthly charges as has been stipulated in the contract.The importance of a this insurance is that it provides the security against losing a home in theinstance that the insured person has failed to pay the money he owes the lender.Most lenders are not giving private insurance even to people who offer lower than 25% downpayment on their mortgage loan. This means too that they are no longer giving them lower interestrates compared to their counterparts who pay more than 25% of the mortgage loan. When theoutstanding value of the loan is less than 80% of the value of the home there is no need for privateinsurance and this means that it can be called off at any time within the repayment period. Dependingon the lender, some borrowers will not be allowed to call off the private insurance unless the valuefalls below 50% of the assessed value of the house.The purpose of the life insurance is to protect the interests of the owners of the house; so that thedependents of the owners of the house are left with something they can call their own in the event ofthe death or the incapability of the owner of the house. This means that they will not have to pay themortgage fees after the death of the owner of the house. There are some factors that may come in toprevent this from happening and in some cases life insurance does not necessarily give all thesebenefits. Overall it depends on the age and the health risks as well as the vulnerability of thedependents of the person seeking the loan. Insurance companies may or may not give suchinsurance policies to borrowers who are considered high risk. Most people do not qualify for a lifeinsurance policy but the other option for them remains to be the regular life insurance policy, whichensures that in the event of the death of the owner of the house, the life insurance amount paid outwill be used to settle the mortgage debt.Over 50 life insurance