Acquiring a home loan comes with countless decisions to make, and one you may not have considered is Mortgage Lenders Insurance. Mortgage Lenders Insurance may not be a good option for everyone, but it could help you acquire your mortgage faster than you planned.
Lenders Mortgage Insurance will protect your bank or lender if you happen to default on your mortgage and there is a shortfall. A shortfall will happen if the sale of your home does not cover the amount you owe on your mortgage. In this instance, the bank or lender will attempt to recover the amount owed from the Lenders Mortgage Insurance provider. If you have a deposit less than 20%, and no guarantor, you may be obligated to buy Lenders Mortgage Insurance.
You may be able to take out a mortgage with a smaller deposit than what is usually required. This can often be a good choice for those who want to buy a house sooner rather than waiting until they have saved enough for a 20% deposit
You may be covered if you do default on your loan and there is a shortfall
Purchasing Lenders Mortgage Insurance often means you will not need a guarantor if you do not have a large enough deposit
Lenders Mortgage Insurance exists to protect your lender or bank, not to protect you
If your default on your loan, there is a shortfall, and an insurance claim is made, you are likely to still be obliged to pay the premium
The cost of Lenders Mortgage Insurance depends, but you can expect to pay around 2% of the amount of your home loan. This may not seem like much, however, this money could be spend paying off your mortgage directly
The insurance provider may attempt to recover the excess money from you in event of a shortfall - they will not necessarily make a payment directly to the bank or lender
Usually you would pay off the insurance in monthly instalments with your home loan. This means that you will be accruing more interest on your mortgage.
Lenders Mortgage Insurance is not to be confused with mortgage protection insurance, which is insurance to cover you in the event that you cannot pay back your loan due to sickness or inability to work.