When getting a home mortgage loan this inevitably raises the question of mortgage insurance cost . The acquisition of basic insurance against damage or the complete destruction of housing is mandatory for all, without exception; in its absence, no bank will issue a loan. And mortgage insurance gives a borrower the opportunity to be confident and protected from unforeseen circumstances related to damage to property or its loss. The term of insurance is equal to the term of payment of the loan on the mortgage. There are also types of mortgage insurance against such risks as loss of working ability of the borrower or his death, as well as title insurance against loss of property rights to housing. Obtaining these insurances is not obligatory by law, however many banks require their presence and, in the absence of such, raise the interest on the loan.
The main purpose of mortgage insurance is to make home purchase on credit as affordable as possible for a large part of the solvent population.
Main aspects of its achievement?
-Reducing the amount of the down payment on the mortgage; Increased loyalty of the lender towards the borrower;
-Protection of the lender against financial losses caused by the inability to pay the mortgage amount by the borrower.
-In general, mortgage insurance contributes to maintaining stability in the system for financing real estate acquired. It is beneficial for both lenders and borrowers, as it protects the interests of both parties.
Mortgage insurance cost
Of course, insurance rates differ for different borrowers and are set when considering each individual case. On average, they amount to 0.3-0.5% of the total amount of insurance , which is determined based on the parameters of the purchased property:
-the materials from which housing and ceilings have been constructed;
-The presence or absence of fire and security systems in the house.
In the event that the borrower has purchased a full package of mortgage insurance services such as mortgage insurance premium, its payments per year will be 1-1.5% of the remaining loan debt. Thus, each year the cost of insurance will decrease. Mortgage insurance premiums are made by the borrower, usually once a year . When the maturity date is already very close, the bank sends the data on the loan balance to the insurance company, and, based on them, the company calculates the mortgage insurance premium amount. A number of insurance companies allow you to make payments once a quarter, which is much more convenient for most borrowers than contributions once a year. Immediately the very moment of insurance payments depends on whether housing is being acquired during construction or already ready . In the first case, the borrower begins to transfer payments to the insurance company after he becomes the owner of the property, in the second – immediately after purchase.
What needs to be done if it comes?
The insured event during the registration of housing insurance is the loss or damage to real estate due to the following reasons:
-Fire, natural disaster, flooding;
-Vandalism and other criminal actions of third parties: putting explosives, arson, etc .;
-The defect in the building structure, about which the borrower at the time of registration of the mortgage was not aware.
When an insured event occurs, the insurance company and the bank should be notified as soon as possible . Situations are different, and therefore it is worthwhile to clarify the sequence of actions for a particular incident. If property is damaged, the insurance company pays the borrower a refund. However, you need to know that when you insure your home only on the amount of the loan, and not on its full cost, insurance will not cover the costs of restoring real estate. With the complete loss of housing (physical) money from the insurance company receives a creditor bank – the balance of debt on loan repayments plus 10%. The borrower is entitled to claim the difference in the value of lost property and mortgage loan, but only if insurance is issued for the entire amount of housing. Some borrowers fear that when an insured event occurs, they will not have enough money to pay off the debt. But this, in principle, cannot be, because the insurance company is always notified of the size of the debt, and no bank will allow any amount lent to the borrower to be insured.
Waiver of insurance
Coordination of the replacement of the insurer for mortgage insurance. You can refuse insurance only if lump-sum payment of total debt to the bank. Otherwise, nothing, everything is written in the contract. If the insurance company is not satisfied with something, then it can be changed, but only with prior agreement with the lender . But it should be remembered that banks prefer to cooperate exclusively with large and proven insurance companies.
If the insurance company does not pay
Here it is necessary to go directly to the arbitration court . The bank in this case will only provide support. But if an insured event occurred for a reason and the borrower to some extent “took part” in its occurrence, then the bank, of course, will be against such an unscrupulous client and will have to sell the apartment.
Mortgage insurance: benefits
Most of all relevant insurance for mortgages for people with average incomes. After all, a small down payment and a significant amount of the loan mean an increased financial risk for the lender . And the presence of insurance from the borrower gives a guarantee to minimize this risk. From the point of view of the borrower, mortgage insurance is an opportunity to sleep well and not think about the possibility of unpleasant incidents related to the acquired housing. To get insurance, you must first select a reliable, time-tested mortgage insurance company. You can consider the options proposed by the lending bank, and you can search for yourself. It is desirable that the company had reinsurance partners and the process of preparing and checking documents was not too long and dreary.
When the mortgage insurance company is selected, you need to write an application using the template provided, then return the list of required documents and, after determining the rates for the contributions, sign the mortgage insurance contract.In this document, everything should be laid out on the shelves so that there are no questions about an unforeseen amount of insurance payment or non-payment of money in the event that the contract is not insurance. Mortgage insurance gives confidence to the borrower and increases the creditor’s trust limit, which is generally important for developing financing for the residential real estate market and increasing the affordability of housing.