What Is Mortgage Insurance?
Mortgage insurance protects lenders in case a borrower defaults on their home loan. It helps borrowers secure financing with a lower down payment and allows lenders to recoup some of their losses.
While that’s just a short overview of what mortgage insurance is about, there’s a lot more to it, and this article will delve into the concept of mortgage insurance, its workings, and the various types available to home buyers.
Remember, understanding mortgage insurance is crucial in making informed decisions about home financing, which is why this read is a must.
Here are all the things that you need to know about Calgary Insurance Quotes:
What is Mortgage Insurance?
It is crucial for everyone to know what mortgage insurance is. Basically, mortgage insurance is a type of insurance policy that protects lenders against potential losses if a borrower defaults on their home loan. This type of insurance policy is typically required by lenders when a borrower makes a down payment that is less than 20% of the purchase price of the home. The insurance policy is usually purchased by the borrower and is added to the monthly mortgage payment.
What Does Mortgage Insurance Cover?
Mortgage insurance provides coverage for the lender in the event of a borrower defaulting on their home loan. Here are some of the coverage that this type of insurance policy offers:
- Repayment of a portion of the loan balance: In the event of a borrower defaulting on their loan, mortgage insurance can repay a portion of the loan balance to the lender, helping them recover some of their losses.
- Cost of foreclosing on the property: If the borrower defaults on their loan and the property goes into foreclosure, mortgage insurance can cover the cost of foreclosing on the property, including legal and administrative fees.
- Unemployment or disability coverage for the borrower: Depending on the type of mortgage insurance, it may also provide coverage for the borrower in the event of unemployment or disability. This can help the borrower make their monthly mortgage payments even if they are unable to work.
- Death coverage for the borrower: Some mortgage insurance policies may also provide death coverage for the borrower, which can help repay the loan balance in the event of the borrower’s death.
How Much Does It Cost?
The cost of a mortgage insurance policy depends on several factors such as the amount of the loan, the down payment, the type of loan, the credit score of the borrower, and the insurance company that the borrower is going with. Most of the time, the cost of mortgage insurance is a percentage of the loan amount and is added to the monthly mortgage payment. This percentage can range anywhere from 0.5% to 2% of the loan amount annually and is divided into monthly payments that are added to the borrower’s mortgage payment.
To get a more accurate estimate of the cost of mortgage insurance for your specific situation, it is best to speak with a mortgage professional or insurance agent in Calgary like Harpinder Sidhu, who can provide a quote based on your individual circumstances.
Want to know more about mortgage insurance? then feel free to consult with Calgary Insurance Quotes