What is Mortgage Insurance and How it works? Rupinder Rai
If you want to protect your premiums from paying the penalty because of defaulting a payment due to a financial problem, a mortgage insurance plan is ideal. It lowers the risk for the lender when making out a loan to the borrower. With a mortgage insurance plan, you can get a loan that you might not have been previously able to get. When you take out a mortgage to purchase property, you keep the property as collateral; it is important that you insure your mortgage in the event you fail to make your monthly premium payments because of a financial constraint. To find out more information about mortgage insurance or to schedule an initial consultation with Rupinder Rai, please do not hesitate to get in touch.
How does this plan work?
If the borrower makes a down payment of less than 20% on the purchased property, they will be required to pay for mortgage insurance. It significantly lowers the risk for the lender when making out a loan to you, ensuring you qualify for the loan. When you purchase a mortgage insurance policy, the premium that you make to the lender will be included in your closing costs and total monthly payment.
Types of mortgage insurance plans available:
- Bank mortgage insurance
A more popular mortgage insurance policy option. In this scenario, the lender is the beneficiary, and the bank takes complete ownership of the insurance plan. As time passes by, the coverage amount decreases, and the insurance comes to an end once the mortgage ends. The policy repayment options are of low risk. If the owner of the policy dies before the mortgage is completely paid off, the bank will take care of it by ultimately paying off the remaining amount.
- Personal mortgage insurance
As the owner of the insurance plan, you can name a beneficiary. You are guaranteed coverage with this type of mortgage insurance and choose to change the plan if and when required.
Why should you choose a mortgage insurance policy?
A mortgage insurance plan can protect you from any unforeseen financial crisis in the current real estate market. It also ensures that if the borrower fails to pay the entire mortgage amount, the bank pays the lender the remaining amount in full. When purchasing property, mortgage insurance can significantly lower your premium interest rate. Other advantages include:
- You, as the borrower, have a plethora of options to choose from.
- When you are buying property, you have the option to pay a low down payment amount.
- If the policy owner passes away, the insurance company will take care of the mortgage amount.
For further information on mortgage insurance or to schedule an appointment with Rupinder Rai, call 416-561-1800 today. I am based in Brampton.