OneInsure Blog
Post By Joan
What Is Mortgage Insurance?
Comments
mortgage insurance, private mortgage insurance
Mortgage insurance is a kind of insurance plan that protects a lender in the event of loan repayment default due to death of the borrower. It reduces the lender’s risk of giving you a loan, thus allowing you to qualify for a higher value that you might not have been able to get earlier. Mortgage insurance is a popular insurance product in developed countries like the United States and Canada. Although it is a very new concept in India, its growth is expected to pick up pace soon.
One of the advantages of having mortgage cover is that you can get higher financing for your house. Since lending institutions are financially covered in case the borrower defaults (in the event of death), they would be willing to extend a higher amount and ask for lower down-payment. Mortgage insurance covers the principal and the interest on home loan. The cost of this policy is usually added to your home loan and the same needs to be paid with the loan.
Premium payments
Generally mortgage insurance is a single premium plan - premium is payment in a single lump-sum. A few insurers agree to regular and limited premium payment terms. In case of single premium, lending institutions sometimes allow borrowers to bundle the premium with the loan amount.
How is mortgage insurance different from home insurance?
A lot of people confuse mortgage insurance to be home insurance. A home insurance protects the homeowner, while mortgage insurance protects the lenders. Home insurance covers the structure and contents of your home for possible damages due to theft, fire and other calamities. Mortgage insurance, on the other hand, provides protection to the lender against default of loan repayment due to death of the borrower. It must be noted that the sum assured paid out will be to the extended of the pending loan repayment amount.
Conclusion
Pay careful attention to the kind of insurance plan you choose. The mortgage balance covered will vary from institution to institution. With the right cover, you will have one less thing to worry about during difficult moments.
