Mortgage Life Insurance
It is important for each and everyone for us to have insurance plans. After all, one can get a lot of insurances nowadays. You can insure yourself. You can insure your house, your automobile, or even your pet cat and dog. An insurance policy serves as a back up plan in life, sort of a fall back. A person would not be young and healthy always. In fact there are those who would not have to wait getting old before becoming disabled. So what then if you are still paying the mortgage. What if something happens to you, would you leave that debt upon the shoulders of your loved ones?
Thus a mortgage life insurance is highly needed. This insurance policy would cover the mortgage expenses of a person in the event that he falls into illness, disability, or even death. The point here is not to be morbid, but to be realistic. Life is life and things happen. PMI or Private Mortgage Insurance is there to protect the lender when default occurs. The usual is to cover a part of the amount a person borrowed. There are now many loan products from the government out there, including the MIP or Mortgage Insurance Premium.
Mortgage Life Insurance works this way. If a person has a mortgage loan of about eighty percent more than the actual value of his property, his equity is limited. Because of the limited equity, that person is required to pay mortgage insurance. This is asked by lenders so that when that person defaults, their institution will be protected. That person would now then have to pay an MIP or Mortgage Insurance Premium of 1.5% of the total amount loaned at closing. The ratio of loan to value would also be checked and depending on that, there might be a monthly premium also.
There are various kinds of mortgage insurance. One of them is the PMI – Private Mortgage Insurance. This is the mortgage loans’ default insurance. PMI is provided by private companies. Without the need of paying 20% down payment, a borrower is allowed to obtain a mortgage. This can be done because PMI covers the lenders for a high LTV or loan to value mortgage possible added risks.
The Mortgagee’s Title Insurance is another mortgage insurance policy. This is all about protecting the lender from any claims of ownership regarding the property that is being mortgaged. Claims like these could possibly arise in the future, and the Mortgagee’s Title Insurance aims to prevent them.
Mortgagor’s Title Insurance is yet another kind of mortgage insurance policy. This time, this policy aims to protect the interests of the property’s owner from claims to be made by other interested parties. This policy is usually a supplement to the Mortgagee’s Title Insurance. The buyer is usually the one paying the premium.
So there you have it. Life can be filled with surprises and it would do better for us all to try and prepare for all circumstances. This way, complications later on would be avoided.
by Maria-Goldsmith 19 years ago