A home is a major asset and having mortgage life insurance can offer you a level of protection. Consider how unpredictable life can be. If anything were to happen to you or your spouse, your home could potentially be lost. Moreover, it would put stress on those in your family who are left behind, especially if they have to pay all the mortgage costs on their own. Having mortgage insurance is one way of preventing that from happening.
What is mortgage insurance?
When you buy a home, there are different types of insurance you can get to protect you, your lender, and your family. These include a mortgage loan insurance (for homebuyers who have less than a 20 percent down payment), and home insurance, which will protect your property and its contents.
If you have mortgage life insurance and something unexpected happens, such as an illness or death, your provider will step in and pay off some of your mortgage debt so you don’t have to worry about losing your home. It can also reduce the amount of stress on your family at a particularly difficult time.
How does mortgage insurance work?
There are two avenues you can take to get mortgage insurance for your home. It can be purchased from a financial institution such as your lender. In that scenario, payments are made to your lender, and how much your insurance will cover decreases as the amount you owe on your mortgage decreases. However, your premiums will not change.
Another option is to buy mortgage insurance from another provider. In this case, the amount you are insured for does not change and neither do your premiums. For example, if you buy insurance for a $200,000 mortgage, that coverage will not change even if the amount you owe on the mortgage goes down over time.
What You Should Know About Mortgage Insurance
Mortgage insurance has its pros and cons, so there are some other things that you need to be aware of before you decide to buy it.
Beneficiary. If you buy your insurance through your lender, they are the beneficiary. So, if anything happens to you, your lender will get the payment. However, if you go with another financial institution, you can name your beneficiary. That beneficiary will directly receive money that they can use at their own discretion.
Switching insurance. Buying your mortgage insurance through another company gives you the option of switching it to life insurance. This flexibility is great to have, as your needs will also change over the years. If you opt to do this, your premiums will stay the same and you will be covered for life. It is important to note that if you do buy insurance through your lender, you won’t have this option.
Changing lenders. If your insurance is purchased through your lender and you decide to change lenders, your mortgage insurance will not automatically go with you. If you want to continue having mortgage insurance protection, you’ll have to requalify with your new lender. However, if you have coverage through another company, you’ll likely be able to keep the same coverage.
Having mortgage insurance can give you peace of mind when it comes to your home. If you are interested in learning more, call Northwood Mortgage™ at 888-492-3690 or contact us here.