All About Mortgage Insurance

Tuesday, August 31, 2010

Update Sept. 02 - 2010 All About "Mortgage Insurance" By Insurance Experts

Mortgage insurance is defined as a decreasing term life insurance depending to the amortization of the mortgage period while the premium remains the same over that period. You can purchase the mortgage insurance from the bank, trust or life insurance companies.
1. If you purchase your mortgage insurance from the bank or trust
a) No medical exam is required
b) The beneficiary of the policy is the bank or trust
2. if you purchase your mortgage insurance from the life insurance companies
a) medical exam is required for any sum insured over $100,000
b) The beneficiary of the policy is designated by you ( Kyle J. Norton)

What is Lenders Mortgage Insurance and When Home Refinancing Do I Require It?
By Kezz Roby

Questions often asked, are "Do I need Mortgage Insurance for Home Refinancing?" and "What is Mortgage Insurance?"
In this article I will clarify what Lenders Mortgage Insurance is, how it works and influences you when Home Refinancing.
The function of Lenders Mortgage Insurance (LMI) is to protect the home loan lender from suffering a loss of money in the event of a borrower defaulting on their mortgage, resulting in foreclosure and a ensuing mortgagee sale. If the proceeds from the mortgagee sale are insufficient to pay back the home loan in full, LMI will pick up the shortfall for the home loan lending institution.
LMI should not be confused with Mortgage Protection Insurance (MPI), which protects a borrower against their lack of ability to repay their mortgage in the outcome of an unexpected circumstance like unemployment, illness or death. MPI covers payment of your mortgage instalments and/or your home loan balance. CPI insurance is not mandatory and is solely the decision of the borrower. The premium for CPI is paid yearly and usually varies based on the size of the home loan.
Why is Lenders Mortgage Insurance required?
Lending institutions including Banks, Building Societies, Credit Unions and non bank lenders, either use cash from deposits held in savings accounts and term deposits, or borrow money to provide home loans to borrowers for home refinancing, purchasing, construction or equity purposes. By using other peoples' money to fund home loans, the lending institutions create an obligation to repay that money to the suppliers of the funds while at the same time taking on the risk that they may not get all or some of the cash back that they advance.
Even though they hold real estate property as security for the home loan, the value of the real estate property may decline due to market forces, corruption or damage to the improvements, resulting in the security not having an adequate amount of value to cover the size of the home loan. To offset their obligations to the suppliers of the loan funds, the lending institutions effect LMI to offset any likely shortfall.
Do I benefit from Lenders Mortgage Insurance?
Before LMI was offered, lenders desired borrowers to have a deposit of no less than 20% when buying a dwelling or equity of 20% when refinancing a home to minimise the risk of lending and protect them against possible loss in the event of foreclosure. Now with the capability to pass on the risk of loss to an insurance company through LMI, lenders are prepared to allow a lesser deposit for purchases and less equity for home refinancing.
Also, if lenders didn't use LMI to alleviate lending losses, then those losses would need to be recouped from the earnings of other home loans, in effect increasing home loan interest rates. To stay away from this, lending institutions opt to effect LMI and have the insurance company take on the risk and bear any loss.
By lenders using LMI, the benefit to borrowers is that they are able to buy a property using a lesser deposit or refinance a property with a lesser amount of equity and/or obtain lower interest rates than they would otherwise be able to do with no LMI.
Please note, that even though LMI does give some benefits to the borrower, it will not cover the borrower against loss ensuing from foreclosure. LMI ONLY PROTECTS THE MORTGAGEE as in effect, they are the beneficiary of the insurance policy! In the event of a claim for loss, the mortgagee will get the proceeds from the LMI claim, not the mortgagor. Any loss resultant from foreclosure, in spite of of LMI, is a loss incurred by the borrower and will remain as such. The only distinction being is that the borrowers legal responsibility to the finance provider for the loss will move as a legal responsibility to the LMI provider for the loss in the episode of an LMI claim by the mortgagee.
Who pays the Lenders Mortgage Insurance Premium?
The LMI providers contract of insurance is with the lender and the premium is payable by the lender though in certain instances the lender may pass on the cost of the insurance to the mortgagor as a fee of providing the home loan.
Home loans where a deposit or equity of less than 20% is allowed represents a higher risk to the lender, and in this case the lending institution will generally pass the price of LMI on to the mortgagor as a fee for them being able to acquire a home loan that they would generally not have been able to obtain.
What is the cost of LMI and how is it paid?
The premium for LMI is a one off premium due upfront at the time of settlement of the mortgage with payment of the premium being the liability of the lending institution. The lender will subtract the premium from the loan proceeds if and when the cost of LMI is to be met by the mortgagor.
The premium cost will vary depending on the size of the loan and the ratio of the loan size to the value of the security i.e. Loan to Value Ratio (LVR). The higher the LVR the more expensive the premium, also the bigger the home loan amount the more pricey the premium.
Are the providers of Lenders Mortgage Insurance reputable?
LMI providers operate under strict government regulation to make sure they maintain sufficient liquidity to meet claims, as well as hold adequate funds in reserve, in the event that a large number of claims are made in a short length of time or rise substantially.
How is Lenders Mortgage Insurance arranged?
The granting of LMI is not automatic and must be applied for by way of application to the LMI provider. Should your home refinancing require LMI, your Mortgage Broker, Mortgage Planner or Consultant in conjunction with the lender, will organize all the necessary documentation and present you with all the information about the application process.
Provided the borrower, home loan structure, home refinancing purpose and security property meet with the appropriate LMI provider underwriting guidelines an LMI Certificate of Cover will be issued to the mortgagee.
As you can understand, Lenders Mortgage Insurance does offer some benefit to the borrower in the form of lower interest rates however it is principally used as a risk mitigation instrument by the lender. When refinancing a home the benefit of LMI is greatest when the security property equity is less than 20% as the mortgagor would generally not be able to obtain such a home loan. Nonetheless that increased benefit arrives at a cost in the form of increased home refinancing expenses.
So when home refinancing it is crucial to preserve as much security property equity as possible, in effect reducing the price tag and/or requirement for LMI and balance the worth being achieved from the home refinance with the cost of LMI.
Kezz Roby is a leading Australian Mortgage Planner well known for his Home Refinancing Tips & Strategies that have greatly benefited many Australian Homeowners.
For more quality information on Homeloans plus Refinancing Tips & Tricks visit our blog /website - refinancingcampbelltown.com.au

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Article Source: http://EzineArticles.com/?expert=Kezz_Roby

Sunday, August 15, 2010

Update August 16 - 2010 All About "Mortgage Insurance" By Insurance Experts

Home Owners Need Home and Mortgage Insurance Coverage
By River C.

Any one who owns a home, and that includes the majority of us who are making monthly payments to a home and mortgage company, must have insurance coverage on their home. If the home is not paid for yet the mortgage company will insist there is at least hazard insurance cover. The cost of the insurance policy is generally included in the monthly mortgage payments. It is considered part of the PITI that constitutes the total payment we must make each month. The initials PITI represent the Principal, Interest, Taxes, and Insurance.

Taxes and insurance come from escrow accounts

Typically the home buyer takes out a "secured loan" when purchasing a home. This means they have the real estate and home as collateral and if the mortgage payments are not met, they can lose the house to the mortgage company. The term mortgage means a mortgage loan which is considered a "secured loan". Along with the principal payments which must be made on the balance of the home each month, there are also taxes and insurance which must be paid, usually yearly. Taxes are generally paid to the county in which the home lies, while insurance payments must go to an insurance company which provides various types and amounts of coverage.

Home and mortgage insurance cover is usually based on how much the home is worth and that amount will usually increase year to year. The mortgage company makes once a year payments to cover both the taxes and the insurance premium and then will add this amount on to the mortgage payments to be made by the homeowner each month. This amount is deducted from an escrow account which is an estimate of taxes and insurance cost for that year. Mortgage companies then determine how much is to be added on to the PI or principal and interest payments to cover the amount owed for the TI or taxes and insurance, prorated over the length of one year. In other words, one twelfth of the total cost of the insurance premium and one twelfth of the taxes will be added on to the monthly payment. This way the home owner does not need to pay the entire tax bill or insurance premium at one time.

Types of insurance coverage vary

Basic home and mortgage insurance cover, generally called hazard insurance, is designed to protect the home buyer from loss if damage occurs to the home. The type and amount of coverage depends on the location of the home, the value of the home, and many other factors. The structure itself as well as personal property inside the home and garage will be evaluated and their worth may increase year by year. Loss of use of the home, which may include added living expenses while repairs are made to the home, is usually included in the basic policy. Fire, flood, earth quake, hurricane, and other disasters may be part of the policy and sometimes involve extra coverage.

Liability coverage should be included in home and mortgage insurance and will provide coverage in case of accidents at the home and in some policies, cover the home owner when away from their home. Visit our website for more information.

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Article Source: http://EzineArticles.com/?expert=River_C.

Thursday, July 29, 2010

Update July 30 - 2010 All About "Mortgage Insurance" By Insurance Experts

Reverse Mortgage Insurance
By John Andrew Jr.

What is reverse mortgage insurance? What are the requirements in order to take advantage of reverse mortgage? First and foremost, the term reverse mortgage must be defined in order to answer both of these questions. To put it briefly, it is a type of mortgage available for old and senior individuals as mandated by the law and the government of the United States. Reverse mortgage insurance on the other hand is a type of insurance that caters to the rights of both the creditor and debtor in a reverse mortgage in case one or either of them is unable to comply with the agreement entered by them through the reverse mortgage contract. This is a remedy that will ensure that the party that is deprived of compensation will still be able to get something of equal or greater value regarding what has been insured through the mortgage agreement.

In order to avail of this reverse mortgage insurance, one must first be able to comply with the requirements of such a mortgage. Firstly, the person availing of this kind of mortgage must be at least 62 years of age. This is a requirement that cannot be waived since the spirit of the law that created this type or mortgage specifically ensured that the individuals who are already of old age have better benefits than younger ones. This coincides with the principle of the older the person gets then the easier and more lenient the requirements to avail of this mortgage become. The debtor or borrower of the money must be exactly 62 years old once the contract of mortgage takes effect as specified in the date contained in it.

Secondly, the debtor or borrower must undergo credit counseling. This credit counseling must be done with a financial specialist or expert through a third party counseling service provider. The objective of this requirement is to ensure that the senior citizen debtor is well informed of what will happen once he or she engages in this reverse type of mortgage. This will equip him or her of the necessary knowledge that will ensure that he or she will not be, in anyway, put into a position that is not favorable. This is a method of the law in itself to protect the rights, privileges and interests of the old individuals of the United States of America.

Thirdly, the debtor must not have any subsisting or pre-existing mortgage in order to avail of this kind of mortgage. This is the protection allotted by the State and the law in order to protect the rights, interests and privileges of the creditor or lender of the money. This will ensure that both the creditor's and debtor's rights have equal protection of the laws that pertain to mortgages and loans. If you want to avail of reverse mortgage insurance then make sure that you first comply with these three requirements in order to prevent any further complications regarding the mortgage itself together with the insurance for such mortgage that you will avail of.

Your base for information about Reverse Mortgages. Let us guide you through the requirements, costs, and all the other details that you need to know. Learn the answers to all of your questions and become more informed in order to get the best deal that you can. Reverse Mortgage Insurance

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Monday, July 12, 2010

Update July 13 - 2010 All About "Mortgage Insurance" By Insurance Experts

The FHA 203(k) Rehabilitation Mortgage Insurance Program - The "Fixer-Upper" Loan

By Jim Hodson

Under Section 203(k) of the National Housing Act, the Federal Housing Administration (FHA) offers mortgage insurance on loans issued by approved FHA lenders to help borrowers purchase and rehabilitate a home. The home should be one that the borrower plans to use as their primary residence. This same insurance program also covers cash-out refinance mortgage loans whose proceeds will be used by the borrower to rehabilitate their current home.

Why the "Fuss" About FHA 203(k) Loans?

Trying to buy a "fixer-upper" home and rehabilitate it can be a very complicated process for borrowers. It typically requires taking out multiple short-term loans with high interest rates. These loans often require a balloon payment when they become due.

The FHA created Section 203(k)-insured loans to address the needs of such borrowers wanting to rehabilitate new or existing homes. This program makes the process of buying and fixing up a new home much simpler by providing the borrower with one long-term mortgage loan that covers everything.

How Do Section 203(k) Loans Work?

There are several basic requirements for a home loan to be covered under Section 203(k). The home must be at least one year old, and the planned rehabilitation must cost a minimum of $5000. The property value of the home must fall within the FHA loan limits for that area of the country. FHA maximum loan limits differ for each county, borough, or county in the state where the property is located..

When a 203(k) loan is closed, some of the money goes to pay for the purchase or refinancing of the home. The remaining money is placed in an escrow account to pay for the work on the home. Funds from the escrow account are paid out as rehabilitation work is completed.

Work Covered By Section 203(k)

Many types of improvements can be covered under this program. They include but are not limited to:

modernization of the home
correcting health or safety hazards
repairing or replacing plumbing
repairing or replacing electrical
repairing or replacing roofing
repairing or replacing floors and floor treatments
landscaping and other work to improve the appearance of the property
energy efficiency improvements

Other types of home improvements are covered. You will want to consult your lender to find out if your particular rehabilitation needs can be covered under the program.

Who Can Apply?

Anyone can apply for an FHA 203(k)-insured mortgage as long as they can afford the monthly house payment based on their debt-to-income (DTI) ratio. To apply simply contact and FHA-approved lender. Many services are available online where you can fill out a single form and get referred to multiple lenders allowing you to compare multiple rates and loan offers.

J Hodson operates FHA-Loan.org, an online resource for borrowers seeking information about FHA loans. There you can find more information on FHA 203(k) loans including the specific FHA maximum loan limits that apply to the particular county, borough, or parish where your property is located.

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Wednesday, June 23, 2010

Update June 23 - 2010 All About "Mortgage Insurance" By Insurance Experts

Considering Long-term Mortgage Insurance

By James P White

Taking out life insurance that includes critical illness cover was the sole method of gaining long-term mortgage protection until recently. There are now options available to provide long-term payment protection as a substitute to short-term payment cover.

The traditional method of gaining long-term mortgage insurance was to include critical illness insurance with mortgage life cover. This form of protection would payout a lump-sum should the policyholder suffer a 'critical illness' condition specified in their policy document. The most common types of illnesses covered include heart attack, stroke and cancer. The payout from the policy could be used to repay the loan in full if the amount of cover was set equal to the amount of debt outstanding at the start of the policy.

In addition to the cover mentioned above, many households would also take out mortgage payment protection to cover monthly loan repayments should the policyholder have to cease working due to short-term accident, sickness or unemployment. One of the greatest issues with these policies is that they will only ever payout for a maximum period of 24 months.

If serious illness insurance is added to mortgage life cover then one would hope that any illness that lasts more than 24 months would be covered, however, there is a risk that the illness is not specified in the policy. New long-term payment protection plans avoid this issue as they can payout until the end of the mortgage loan for nearly any medical condition that prevents the policyholder from working. Thus, this new form of protection provides both an increased length of cover and an increased scope of protection. The main downside is that it can cost considerably more, especially for older individuals.

Article produced by James White of Drewberry Mortgage Insurance, specialist providers of information, advice and broking services in the mortgage protection insurance market.

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Thursday, June 3, 2010

Update June 03 - 2010 All About Mortgage Insurance By Insurance Experts

Disadvantages of Mortgage Life Insurance - Why Term Life is Better

By Denise M

If you are in the market to buy a home or already have a mortgage account, you are probably looking for ways to protect your loved ones from future mortgage debt, in the event of your death. The most common options are mortgage life policy and term insurance.

Term life insurance
A term life policy is an insurance policy that you independently take out with a insurance company, with the idea that a part or all of the proceeds be used to pay off your mortgage. You name a beneficiary, usually your dependants, who are instructed to use the money to settle your mortgage account. Your beneficiaries can retain any left over amounts.

Mortgage life insurance
A mortgage life insurance policy is not offered by a insurance company, but by banks and other financial institutions that have your mortgage. The financial institution is the beneficiary, and the product is designed to have level premiums with decreasing death benefits. Usually mortgage life insurance doesn't require a medical exam.

Disadvantages of mortgage life insurance

Mortgage life insurance coverage decreases with time: The amount of cover decreases in parallel with the amount outstanding on your mortgage. However, your premiums remain level, and you end up paying more for less coverage over the years. Of course, the way it is designed, you don't receive any benefits on it if you outlive the term. The bank retains any left over amount.
A minimum stipulated time period to qualify for a payout: Usually, mortgage insurance doesn't payout in the first six months of the policy. That exposes the mortgagor to a lot of risk.
Excludes pre-existing medical conditions: Though mortgage insurance doesn't require a medical exam to determine premium rates, any pre-existing medical conditions are excluded from the policy.
If you wish to refinance, you need to take out a fresh mortgage policy If you decide to refinance, your existing mortgage life policy ceases, you will have to take out a fresh policy. This can prove to be quite a bit of extra trouble.

Why term life insurance is better

Term life is more affordable: Because the underwriting process in mortgage term life is not as precise as that of a term insurance policy, the premiums can be quite high for mortgage life insurance. Term life is generally more affordable, with its economical premiums.
Death benefits in term life go to the insured's beneficiaries: When you use a term life policy to cover your mortgage dues, your beneficiaries are in total control of the money. If you die many years into your term policy, your mortgage dues would have gone down considerably, which means that your beneficiaries get to retain any leftover cash.
Term offers a choice of policy formats: While mortgage life insurance has a decreasing term format, with term life you can opt for either decreasing term insurance or level term insurance. A decreasing term insurance policy will provide your beneficiaries with only enough money to clear your mortgage. A level term insurance policy on the other hand has a fixed death benefit amount, and therefore can be used to clear off more than just your mortgage amounts. For higher premiums you can also add more protection for other reasons, such as to replace your income, take care of your kids' college fees, etc.
Doesn't require a fresh policy if you decide to change As mentioned earlier, if you decide to refinance, your mortgage life policy ceases. However, with term, even if the underwriting process requires your mortgage documents, the life insurance can't be revoked each time the structure of your finances change.

Make sure you are covered adequately
When you use a term life policy to cover your mortgage, remember that you need to take out additional term insurance to cover your other financial obligations in the event of your death. Look at riders such as critical illness and disability to cover every possibility.

Life is uncertain. With the right mortgage life cover coupled with comprehensive life insurance planning, you can be sure that your loved ones are taken care of when you are no longer around to provide for them.

About AccuQuote:
AccuQuote is a leader in providing term insurance quotes to people across the United States. In 1986 it began operating with a single goal: to make the process of buying term life insurance as easy as possible for its customers. Their experienced professionals consistently deliver the most affordable term life insurance rates by comparing thousands of life insurance policies from dozens of top-rated carriers.

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Monday, May 17, 2010

Update May 17 - 2010 All About Mortgage Insurance By Insurance Experts

Useful Information on Mortgage Insurance Rates

By Ryan Trimble

A lender likes when the buyer puts down at least 20% towards the price of the home. They do not appreciate a high loan to value (LTV) ratio, certainly not one greater than 80%. This means that on a house appraised at $200,000, $40,000 is needed to put down before closing. If this is not possible, either the home cannot be purchased or mortgage insurance (PMI) needs to be purchased.

The purpose of mortgage insurance is to insure the bank or lender against the buyer not paying and perhaps going into foreclosure. The buyer is paying to insure the bank's risk in making the loan to someone who did not put down 20% of the purchase price of the home. If the buyer puts down at least 20%, the purchaser is said to have "skin in the game."

Mortgage insurance rates can run as high as 3%. That would entail a payment of $1,500 for a $200,000 home. In the past the entire PMI was paid at closing. It has since changed and the insurance will run for the length of the loan. This gives the homeowner an incentive to end the payments.

The PMI will be held in escrow. The amount will be added to other escrow items such as home insurance and taxes. when purchasing a home, these added costs must be considered along with the specific monthly mortgage payments.

If the homeowner puts more money into the home each month, the PMI can be stopped, when the equity in the home reaches 20%. If the house appreciates in price and the Loan to Value Ratio has gone down, the mortgage insurance can also be ended.

The buyer will have to take the initiative in ending the mortgage insurance. There is no incentive for the bank to remind you that the insurance can be ended. After all, they are still getting additional insurance that the homeowner is paying for.

Ryan writes numerous articles on obtaining mortgage protection cover and about the facts behind mortgage protection and its importance.

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All About Mortgage Insurance

Tuesday, August 31, 2010

Update Sept. 02 - 2010 All About "Mortgage Insurance" By Insurance Experts

Sunday, August 15, 2010

Update August 16 - 2010 All About "Mortgage Insurance" By Insurance Experts

Thursday, July 29, 2010

Update July 30 - 2010 All About "Mortgage Insurance" By Insurance Experts

Monday, July 12, 2010

Update July 13 - 2010 All About "Mortgage Insurance" By Insurance Experts

Wednesday, June 23, 2010

Update June 23 - 2010 All About "Mortgage Insurance" By Insurance Experts

Thursday, June 3, 2010

Update June 03 - 2010 All About Mortgage Insurance By Insurance Experts

Monday, May 17, 2010

Update May 17 - 2010 All About Mortgage Insurance By Insurance Experts

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