What Do you Mean by Mortgage Protection Insurance?
For most of us our home is one of our most important assets but a home isn’t just an asset it’s where you relax after a long day, where you celebrate important events or your family sleeps at night you’ve worked hard to provide this home for your family and protecting it is important. You may already have homeowner’s insurance which protects your home in valuables against loss due to physical damage such as fire or a natural disaster but have you considered mortgage life insurance mortgage life.
Mortgage protection is a specific type of insurance coverage that’s going to protect you in event of one of three things. Either death or disability or critical illness.
Mortgage protection insurance is also known as MI or PMI or private mortgage insurance. It’s basically a product that allows lenders to lend in situationswhere borrowers have less than 20 percent down payment or when you refinance and do not have 20% equity based on the appraised value. It’s basically an insurance policy that protects the lender from defaulting againstthe loanbut it’s a policy that the buyer or borrower pays for.
Two types of Mortgage Insurance:
- Borrower Paid MI
- Lender Paid MI
Borrower Paid
You pay this as a part of your monthly payment each month. The amount of the payment depends on how much equity you have.
Less equity = higher payment
Lender Paid MI
You take a higher interest rate so that the lender can pay for the mortgage insurance up front. You don’t make an additional payment each month, but you are stuck with the higher rate forever.
How it works:
- It’s very simple to understand how it works. If you pass away or die, its gonna send your beneficiary whoever you select and not who the bank select. This is very important because generally they select themselves, so you definitely want to get covers through bank or through your mortgage broker because it has a lot of major negative drawbacks in doing that. So in the event of any death it gonna send your beneficiary one lump sum, one large check of whatever amount that you select for your coverage.
- Secondly if people became disable , this gonna protect you that way you can still pay for your mortgage because generally most peoples are out of works for months and when they became disable most people don’t have three, six ,nine or twelve months of money saved up in the bank to pay for all the bills , left alone the mortgage. This will send you a check every single month so you can still pay for your mortgage. The leading cause of foreclosures is not the financial reasons it’s actually people become disabled and then they fall behind and then they lose their house.
- The third thing is going to be any kind a critical illnesslike if you have a stroke or heart attack cancer.What that will do for you is pay one large lump sum wires to liveand you’re fighting an illness that way you can still pay all your medical bills, you can pay your main bills, and god forbid you get diagnosed with anything that’s like a terminal illness, it will send you a lump sum to take care of those thing but also you can spend time with your family and maybe have their the vacation of a lifetime with your familywhile you still have few remaining months to survive.
- Last thing is what you called return a premium and that simply mean that all the premiums you pay for the mortgage protection insurance, as long as you have the insurance until the end whether it’s a ten to twenty or thirty year policy. At the end at that time period as long as you don’t pass away then you simply receive all your money back. You get a full refund of all your premiums.
Category: Mortgage
