Mortgage payment protection is beneficial to both lenders and borrowers. Without adequate safeguards against default, the financiers would be taking additional risks, which could reflect in higher interest rates. For borrowers, loss of job, sickness, accident, or death could lead to defaults. To avoid a distress sale to pay off the loan, refinancing mortgage kind of shield is required.
Different types of insurance products are available to cover the mortgage refinancing When the down payment is less than 20%, a Personal Mortgage Insurance (PMI) or Lenders Mortgage Insurance (LMI) will protect lenders from potential default by the borrower.
The fee is passed on to the borrower and collected as a part of the monthly payments. If the arrangement is properly incorporated into the mortgage documents, the borrower can obtain tax benefits on the payment of the premium. In some cases, lenders permit discontinuation of PMI/LMI after a period.
Accident, sickness and unemployment (ASU) insurance, which is often called 'mortgage payment protection', provides monthly installments for a period of time. There would be a maximum limit for such payments. Credit disability and life insurance takes care of mortgage payments if the borrower loses his job, or
dies. The disbursal, which is made direct to the lender, is not taxable. There is also Mortgage Life Insurance. Almost everyone is eligible for these schemes.
Mortgage protection is available from the Federal Housing Administration (FHA) for loans advanced by lenders approved by it. Bush Administration proposals to be made effective in 2007 contain a new scheme to help those buying a home for the first time. Higher insurance premiums may be charged on people with weak credit histories, but this would taper down if regular repayments are made.
Check the market for competitive mortgage insurance rates.
Mortgage Payments provides detailed information on Mortgage Payments, Calculate Mortgage Payments, Bi-Weekly Mortgage Payments, Mortgage Payment Protections and more. Mortgage Payments is affiliated with Online Mortgage Lending.
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