Mortgage Insurance

Mortgage Insurance Overview:

If you have never heard of Mortgage Insurance, it is time to come out from under the rock you have been living under. Mortgage Insurance is becoming increasingly popular in the Indian market. So what is it? Basically, mortgage Insurance guarantees repayment of a mortgage loan in the unfortunate event of the policy holder’s death or disability. Usually 12 months is the tenure of payment of such mortgage insurance (although in some cases it may be higher). Further, the lender can protect his/ her loaned capital through the special type of insurance instrument. Private Mortgage Insurance and Mortgage Insurance Premium are the two types of specialized mortgage life insurance products.

Private Mortgage Insurance is a mortgage life insurance product that’s designed to protect the borrower from the lender in case there is a default. This would generally cover a large portion of the capital borrowed. Private insurance companies offer this kind of insurance products.

Mortgage Insurance Premium is a mortgage life insurance product that protects the lender in case the borrower does not pay the amount because of some unfortunate event. These life insurance products are usually government insurance products.

In the Indian mortgage insurance market, you can choose between the following types of rates:

Fixed Mortgage Rate: This is when throughout the loan term, the rate of interest remains fixed. The market conditions do not affect the mortgage rates. This means that during the process of borrowing funds, the rate of interest will be fixed and will not be changed. This percentage can vary between 12.5 % and 25 %.

Flexible Mortgage Rate: This is when the market movements affect the interest rate. This type of interest rate is called 'floating' or 'adjusting' rates. Flexible Mortgage Rate may be higher in risk than fixed Mortgage Rate.

Why Mortgage Insurance it required?

The first reason that all home buyers should consider purchasing mortgage insurance is the safety factor. Also you will be able to purchase a home with less than 20% down.

When you get yourself a Mortgage Insurance, the risk that your lender takes on is lowered because there is more assurance that their money will be paid back. This means that you can qualify for a higher loan than you would normally be able to get.

Mortgage Insurance Policy Features and Benefits:

Owning a home is made achievable: Mortgage Insurance makes the dream of owning a home possible for millions of people who are qualified as it helps them get mortgages with smaller down payments.

Protect investors and lenders: Lenders and investors are protected from losses in the event that the borrowers are unable to repay the mortgages.

Flexible payment options: Mortgage Insurance can be paid in more than one way. Borrowers have the flexibility of paying in multiple ways. There is the option of borrower-paid, lender-paid and split premium insurance plans.

List of companies which provide Mortgage Insurance are:

  • LIC Housing Finance
  • ICICI Home Finance
  • UCO Bank
  • United Bank of India
  • Citi Bank
  • Standard Bank
  • HDFC
  • Allahabad Bank
  • Kotak Mahindra Bank
  • HSBC

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