What Your Bank Won’t Tell You About Mortgage Insurance

admin   November 19, 2016   Comments Off on What Your Bank Won’t Tell You About Mortgage Insurance

If you’re like the rest of North America and think that housing is reaching unaffordable levels, the truth is that you’re right. However, that’s not even the whole story.

Most people gage the affordability of a property based on the list price. However, what they don’t know is that there are a lot of hidden costs associated with buying a home which further raises the price, from legal fees, land transfer taxes, home inspections and moving costs. One such masked expense that you don’t learn about until later is that of mortgage insurance.

What is mortgage insurance?

Mortgage insurance offers comprehensive life, disability, and illness coverage on your financial obligation. That means that if life deals you a poor hand and due to serious illness or disability you cannot pay any more of your mortgage, the lender works with you to either suspend or forgive your debt. Death is an extreme example, but it means that if you pass away, your family will not be obligated to take on the remainder of your debt. This is extremely important to have in these critical situations.

How much is mortgage insurance?

How much you’ll be paying in mortgage insurance depends on a few different factors that also vary in certain geographical locations. The main factors are how big your down payment is, how long your mortgage is amortized for, as well as the property’s location. The range can be from 1.75% to 2.75% of the purchase price, a sizeable expense for most home owners. However, you’ll also find that different lenders will offer you varying mortgage insurance rates.

Who charges you for mortgage insurance?

When you approach your lender for a mortgage, you’ll see that mortgage insurance is automatically added to your monthly payment plan. Most banks and private lenders provide their own mortgage insurance service. However, what most people don’t know is that there are third party mortgage insurers which often can have better options and rates for you.

Must I go with my lender’s mortgage insurance?

As long as you have mortgage insurance from a legitimate insurance company, a lender cannot refuse to give you a mortgage on the grounds that you didn’t select their in-house mortgage insurance. If you are shopping around for a mortgage with a broker, tell him or her that you are also interested in getting a good rate on your mortgage insurance. Even if you already have a contract for your existing mortgage, most lenders and banks allow you to cancel them without any additional fees or penalties.

How much can I save by switching mortgage insurance providers?

The amount of money that you save monthly depends on your current mortgage insurance as well as the size of your mortgage. The savings can range anywhere from $8-$65 a month which can add up to a lot over the course of the entire repayment period on a mortgage. It doesn’t hurt to check the mortgage insurance market, and in some cases your current bank might even match the rates that you had quoted from other places just to hang on to you as a client.

Saving money has never been as important as it is now that the affordability of real estate is being questioned. Shopping around for the best mortgage insurance for you is one way that you can curb those extra costs that end up pumping up the price you paid for the house itself. Now it’s time to find a reasonable home inspector, real estate lawyer, and start making those mortgage payments on your new home. Congratulations!