There are many types of mortgage insurance now on the market but mortgage life insurance is seen as one of the most important. This is because it ensures that if the main earner in the household were to die then the insurance policy would pay the rest of the outstanding mortgage. Insurance of this type is highly reccommended.
Below are some of the different types of insurance available and in what circumstances they can help.
- Monthly Insurance – This is where they would pay a premium each month along side the mortgage and when they decide to cancel their mortgage insurance the lump sum that had been accumulated over the time would automatically be taken off their mortgage monthly payments.
- Single premium – This type of mortgage insurance is usually financed into your mortgage repayments so usually means you have lower monthly repayment amounts. Also if they were to cancel the policy before the cover term was up they would receive a cash refund to the amount they paid in.
- Lender paid – This form of insurance is paid by the lender and they charge the borrower a higher rate on their interest. This works out best for both the lender and borrower because the borrower doesn’t have the mortgage insurance premiums each month. The lender benefits because the borrower has to pay back a larger amount by the end of the term due to the raised interest.
- Borrower paid mortgage insurance – This is applied in situations where the person can’t afford to make a large down payment on the property. It is paid each month and removes any risk for the lender and if this is agreed then the borrower in some cases would only be required to provide a down payment of as little as 3%.
- There are also some companies that offer the standard cover with payments being monthly but also they include cover for things such as involuntary unemployment. Along with this they charge no extra for the paper work etc. so the rates may be slightly higher than average cover but they offer extra benefits.
There are plenty of advantages to come from having mortgage insurance especially if there is an event that you can’t control that resulted in you not being able to cover your mortgage re-payments. For example if you were to become unemployed and it wasn’t your choice then the insurance company would be inclined to cover the payments you miss.