What is Mortgage Insurance?
Ever tried going bungee jumping? This is a risky sport wherein the individual will take his toll and jump over a thousand feet of high area. This is a self-fulfilling and death defying adventure that most individuals are hesitant to try. Others have joined in the fun and some are still no-no to extent of this adventure.
Relating with bungee jumping is the mortgage phenomenon. This is risky and this is self-fulfilling as well since one has to take out a loan for the benefit of owning a home. But if a borrower is like those bungee jumpers who are in for the drive but not for the risk, then having a safety net is the best alternative that one can use. It is a brilliant idea to protect one’s mortgage once he or she becomes incapable of paying the amortization.
What is mortgage insurance? This is a safety net from unexpected situations like incapability to pay the required monthly payment due to hospitalization from misfortune or illnesses and unemployment.
There are varieties of mortgage insurance. The first one is insurance for one’s monthly amortization due to being lay off or hospitalized. The insurance company will provide with the required loan schedule for a year or two—enough period for the insured to get over the misfortune. The second one is the income protection—the company will provide the insured a certain portion of his or her income for a time until reinstated from work or until retirement. This is the most appropriate type if one wants to be insured and covered against unemployment since the portion of the income cannot only be used for paying the loan but also for other finances.
Mortgage premiums will be computed based on these elements: age, cost of monthly loan payment, insurance features and type of employment. Premiums can increase depending on the amount of insurance policy and the a fore-stated considerations. One can also choose if he or she wanted to be covered partially or fully. This can also affect the monthly premium that the insured should pay for the company. Carefully assess the premium so that one can make sure that the insurance policy is valuable, good and reasonably priced.
Other things to consider in mortgage insurance are the exclusion and the waiting period. There are some instances when the policy will not cover the insured, right after the buying of the policy. The insured should be aware of this exclusion period that is included in the contract policy. This is safety net as well of companies against those individuals who may know they will be laid off their work so they took out a policy. Waiting period should also be determined so that the insured can know when he or she is legal to file his or her claim. Longer waiting period dictates lesser price for the policy.
What is mortgage insurance and what are the things that an insured should remember are the most important things to remember before taking out this policy. Consider these things before diving in the risk of financing a mortgage.