Mortgage protection insurance is greatly helping new buyers to buy their dream house without having much savings with them. Such buyers can pay a smaller portion of the total value of the home and rest into affordable monthly premiums. Various insurance providers are offering different plans for different requirements of customers. However, there are things you should know about before you plan to buy a mortgage plan. In this article, we are going to talk about the same.
Reducing Mortgage Cover
Usually, you need to pay at least 20 percent of the total home value as the down payment and rest in fixed monthly premiums. This is even better if you can make the down payment for the total whole value of the home but this is almost impossible for young buyers as they don’t have enough savings with them. What you are advised to do is making the required down payment and applying for a mortgage loan for the balance amount.
You may approach banks or other lending institutions for the same or can get in touch with a registered lender for the same. They will lend you the required amount enabling you to buy your dream home. However, they don’t do it so easily and you will have to buy mortgage insurance to protect the borrowed amount. This insurance covers the outstanding loan amount with your lender which will keep reducing every month with every premium made by you.
Monthly Payoffs May Not Be Enough
The offered insurance plans provide a cover against the amount borrowed and will help you with a monthly payoff in case you stop working due to illness, an accident or some other valid reasons. This amount is supposed to make mortgage payment timely and take care of essential expenses. However, most providers approve a payoff of around 60 percent of your monthly income and this might not be enough to take care of both the premium and necessary expenses. There are providers who offer a smaller amount as the monthly payoff which you can hardly utilize to pay the monthly premiums.
Another challenge with these plans is that they are not transferable to someone else, once they are bought. This means if you have bought a plan earlier and are planning to move to a different house in the same city or another state now, this might be quite difficult to do the same. Under such scenarios, you are supposed to make a fresh application for another mortgage protection quote and this may be a little complicated for various reasons. Another thing to worry is that if your health status has changed, the interest rate may increase making the premium more expensive than the existing one.
Protection For Lender
Mortgage plans are made to protect the lending institutions and not the insurance buyer. The monthly payoffs you receive in case of going off work, are basically provided to make the mortgage payment timely. The offered amount isn’t enough to help the buyer take care of the medical or household expenses and most of the time, they have to struggle for the same. In case, the buyer goes default on the mortgage, the provider will directly pay to the lender or lending organization to repay the outstanding loan amount.
Truth Behind No Medical Exams
Life insurance plans are provided to interested buyers based on their current as well as previous health status. This means they are offered a premium depending on how good or poor their health has been. Buyers with a pre-existing disease receive little costlier premiums and those with a sound health status are offered cheap mortgage insurance plans. However, that’s not the case with mortgage plans. The providers don’t ask the health status while offering a plan but they do consider the risks related to your health. Hence, they provide the same premium to each buyer which includes the charges for the risks whether or not you get diagnosed with an illness.