Are you ready to buy a home? Have you spent hours looking at homes, imagining yourself and family on holidays sitting in that cosey living room, with Christmas gifts under the tree? Can you imagine entertaining guests and showing your friends your new foyer and massive backyard? Sounds nice right? It can be, but there are some things you need to know about getting a mortgage and more importantly how mortgage insurance works so there are no surprises when life’s unexpected events turn up.
This article will outline all you need to know about mortgage insurance, why you need it and the role it plays as a brand new homeowner.
Let’s jump into this topic and clear up any confusion about mortgage insurance and how it can protect you and the lender from catastrophic life events.
What is Mortgage Insurance?
Mortgage insurance is a type of insurance that protects the mortgage lender or the titleholder if the borrower (you) defaults on the loan, is unable to continue paying the mortgage because of illness or the worst case scenario, death.
There are three types of mortgage insurance:
- Private Mortgage Insurance (PMI)
- Mortgage insurance premium (MIP)
- Mortgage Life Insurance or mortgage protection insurance (MPI)
The first two are based on the type of loan you receive for your home, and the last one is more of a policy that is designed to protect your family or heirs from foreclosure if you were to become disabled, become critically ill, or die unexpectedly.
When you buy a home, if you receive an FHA or USDA home loan, it’s mandatory you pay for mortgage insurance. You may also have to have mortgage insurance on a conventional loan if you put down less than 20%. This will pay the mortgage lender part of the principle of the loan that was defaulted on.
Mortgage insurance makes it possible for you to put down much less of a down payment. When you purchase mortgage protection insurance that is optional and something that many people don’t know about. This will be the focus of the article.
Why is Mortgage Insurance Important?
Mortgage insurance is important for several reasons. When you buy a home, it is a huge investment. It’s something people work very hard to achieve and it’s important you protect that investment.
What mortgage protection insurance does is guarantee you leave your home to your family. It also eliminates the worry that the mortgage will not be paid and that your family will have to struggle monetarily to maintain the payments.
By not preparing and protecting your home from unexpected tragedies, you are gambling with your investment and your family’s livelihood after your death.
When you purchase mortgage insurance you also have options to help pay for expenses if you become critically ill, or disabled.
MPI can protect you and your family from the worst possible situations that would prevent you from paying your mortgage.
When Should you Consider Mortgage Protection?
As a homeowner, you want to protect your family and your home from foreclosure. You want to consider mortgage insurance when you want to ensure the future of your property stays in the family.
If you worry illness can prevent you from working and would put a financial strain on you or your family MPI is a wonderful way to mitigate that situation. It will offer payments to supplement your income.
If you are unable to qualify for disability insurance because you work in a high-risk profession, mortgage protection insurance can be a great way to get gain protection that will pay if a disability becomes a reality.
A great benefit to MPI is most policies offer guaranteed acceptance, you only need to provide specifics about your age, health and amount of your loan.
Who Needs Insurance on their Mortgage?
Any person that owns a home should consider mortgage protection insurance. It is a policy that offers several benefits and can be a policy that is a fixed price. This means that no matter if your health declines after you receive the policy, your premium will not increase.
If you are looking to purchase a home, this is a policy you want to have. Not only will it protect your family from having to deal with debt after an untimely death.
But it allows them to focus on more important life matters without the fear of how they will pay for all the expenses that come bundled with death. Home Loan Protector is a wonderful resource to begin your journey to peace of mind and security.
What Does Mortgage Insurance Cover?
Mortgage insurance, specifically mortgage protection insurance can cover the repayment of your mortgage in full.
The insurance company can make monthly payments or pay your mortgage lender one lump sum. This saves the confusion and guesswork about how family members need to make payments.
What’s also covered is a critical illness. What is a critical illness? Every insurance company has there own definition of this topic but some more common illnesses are:
- Respiratory Failure
- HIV infection
- Traumatic Brain Injury
It’s important you speak with your company and confirm what they include in their list for critical illness. Home Loan Protector has an extensive list of critical illnesses that are covered for their policyholders.
The critical illness rider is in addition to your mortgage protection death benefit policy. This means, if your doctor diagnoses you with a life-threatening disease, your protection doesn’t change.
Home Loan Protector also offers an Accelerated Death Benefit as part of there mortgage protection insurance plan, which means that if you are diagnosed with a life-threatening illness that minimizes your life-expectancy within 12 months you are paid a lump sum.
When you decide to buy a home there are many things you must consider. How you protect that home is one of the most important pieces to the decision you make. Let’s quickly recap what you learned.
You have learned what mortgage insurance is, and how purchasing a home with an FHA, USDA, or conventional loan makes a difference on if you pay private mortgage insurance or mortgage insurance premium.
You’ve learned this protects the lender if you default on your loan.
What’s more important is that you can purchase mortgage protection insurance which protects you from foreclosure if you become physically disabled, critically ill, or die unexpectedly.
This policy secures your investment and protects your family from losing the home upon any of the severe life scenarios mentioned above.
Home Loan protector is the trusted and dedicated company. Thousands of homeowners trust us to customize a policy specific and right for them. Their first-class reputation and unrivaled personal and professional service helps you eliminate frustration when picking a policy.