Mortgage Insurance

In the world of mortgage lending, mortgage insurance is one of the most hotly debated topics. Mortgage borrowers tend to always have the feeling that when they get a loan, a big bank is trying to their best to squeeze every last red cent they can out of them, and in no part of mortgage borrowing is this more true than mortgage insurance. Mortgage lenders on the other hand feel that mortgage insurance is something they must insist upon in certain instances to keep their business above water. Who is right? It depends who you listen to. Some experts will tell you that mortgage insurance is the way to go, while others will tell you not to fall into the trap. Whether or not mortgage protection insurance is right for you depends on your circumstances, and like it or not, the mortgage insurance company may be the one who makes the decision for you.

Mortgage insurance is insurance that covers your mortgage lender should you default on your loan and they are unable to sell the property and cover all of their losses. But while mortgage insurance benefits the lender, the cost for carrying the insurance falls onto the buyer. Some mortgage protection insurance companies offer insurance that will pay off your mortgage in the event of your death, so your family is not burdened with the cost, but you can’t assume that your mortgage insurance policy does so unless it is expressly written into your contract. Normal mortgage insurance also does not cover your mortgage if you lose your job; you would need specialized professional mortgage holder’s liability insurance for that.

Clearly, basic mortgage insurance is there to protect the lender if you can’t pay, period. You get absolutely nothing out of it – your credit is not protected if you default on your home, and even if the insurance kicks in, you’re still out on the street. So why do so many people get it? Because they have to is the answer. Mortgage protection insurance is often required by the lender if your down payment is less than 20% or if you have bad credit. Term mortgage insurance lets you pay for the insurance until you have paid off 20% of the loan or for a set time period (whichever is longer), but most mortgage insurance cannot be cancelled.

To find out how much it will cost you; try a mortgage insurance calculator that can take into account your specific circumstances. Also check the internet for brokers in your area that can help, such as UK mortgage protection insurance companies and mortgage insurance Australia based companies.