Mortgage Insurance: Way to Protect Your Home

Mortgage insurance therefore means an insurance policy that guarantees repayment of mortgage loan in the event of death or, possibly, disability of the mortgagor- the cost of mortgage insurance varies considerably based on various factors. It is in fact defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. The fee paid by the insured to the insurer for assuming the risk is called the premium. This premium is normally financed by the lender and paid to insurance company on the borrower’s behalf.

Depending on the loan-to-value ratio, there may be a monthly premium as well. Mortgage Company while processing the Best mortgage loan first ensures to arrange proper insurance of the property so that the lender in case of default is in a position to recover its costs after foreclosing the loan and selling the mortgaged property. The annual cost of insurance premium depends on the loan amount, type of loan, proportion of the total home value that is financed.

Mortgage insurance, is generally required by the lender as a pre condition of making a mortgage and provides indemnification against a loss or liability on account of unforeseen event or circumstances that may occur or be discovered during the duration of mortgage. The mortgage insurance is usually ranges between one to about half percent of the loan amount. There are two ways to get out of paying costly private mortgage insurance. One way is to agree to a higher interest rate.

The benefit to you is that mortgage interest is tax-deductible whereas private mortgage insurance is not. Insurance rate is a factor used to determine the premium amount, charged for a certain amount of insurance coverage is insurance payable to a lender that may be required when taking a loan. The Mortgage broker shall be in a better position to provide you with complete information relating to insurance aspect and under the situation it is quite advisable to explore this option as well if need arises or you are not satisfied with the mortgage offer.

Types of Mortgage Insurance

Mortgage protection life insurance can be sub classified into various types. Each of the type provides coverage under different conditions. Some of the types of insurance and their benefits are:

* Mortgage life insurance: Mortgage life insurance protects your home and saves your family from the burden of paying off your outstanding home loan balance in the event of your death. This type of insurance can be grouped into level term insurance and decreasing term insurance. You can purchase level term insurance for a fixed period of time. The sum assured and the premiums required remains leveled through out the term. Unlike the level term insurance, decreasing term insurance offers death benefit that matches the outstanding balance on your mortgage. So when you repay the home loan, the policy becomes void.

* Mortgage disability insurance: This form of Mortgage insurance covers your mortgage payments if you are unable to perform the main duties of your job due to an injury or illness. It pays a monthly amount for a period of few years. The amount depends on your policy and your salary at the time of your injury. Generally, the disability insurance policies have a waiting period that varies from 30 days to 90 days. You claim is reimbursed after this waiting period. You can lower your insurance premiums by opting for a longer waiting period.

* Job-loss mortgage insurance: If you want to protect your house from foreclosure when you’re unable to make your monthly home loan payment as because you have lost your job, you can purchase job-loss mortgage insurance. While you search for a new job, your policy will cover your full monthly mortgage payments or a portion of it. Most of the job-loss insurance policies do not start paying as soon as you are involuntarily laid-off from work. The policies usually start 60 days after you file your claim and covers the home loan payments up to 12 months.

Another type of mortgage protection insurance is mortgage critical illness insurance. This policy helps you pay off your loan when you are diagnosed with a critical or terminal illness. Before you apply for a home loan, you should determine the type of mortgage insurance you will require and accordingly opt for it.