Private Mortgage Insurance vs. Credit
Insurance:
Which One is Right for You?
Do you want to buy a house but are worried about how you will pay for it? Of course you are and as scary as the cost of loans are at the moment there is no need to worry because your loans are protected. When you start looking into mortgage or personal loans you will discover the term "credit insurance". Credit insurance protects the loan on the chance that you can't make your payments but it is usually optional.
There are four forms of credit insurance: credit life, credit disability, involuntary unemployment, and credit property. Credit life insurance means that all of your loan will be paid off if you were to die. Credit disability insurance will make payments for you if you were injured or become ill. Involuntary unemployment insurance makes your payments if you were to loose your job - if you are not at fault. Credit property insurance protects your personal belongings if stolen or destroyed in an accident.
As great as this all sounds you really must be very careful before buying, make sure you are getting what you want and it really does cover what you need covered. keep asking questions until you get all the answers you need and please make sure you get it in writing. Credit insurance is normally very expensive so before you make a decision ask what the premiums are. Fine out if it will financed as part of the loan, can you can make monthly payments instead of financing the entire premium. You really need to find out if out if the credit insurance will cover the full length and full amount of the loan. Finally find out if there are any refund or cancellation policies for the credit insurance.
Want to buy a house but you can only put 20 percent or less down?
That's okay there is help at hand most home loan lenders will require you to have a Private Mortgage Insurance (PMI). If you were to default on the loan the PMI protects the lender. In 1998 the Homeowners Protection Act (HPA) had rules for automatic termination and borrower cancellation of PMI on home mortgages. But these rules only apply to those who purchased a house after 1999. The regulations under the HPA do not cover FHA or VA loans.
If you bought a house after August 1999, you should have terminated your PMI when you reached 22 percent equity of the original property value. Your PMI can also be canceled when you reach 20 percent, if your mortgage payments are made on time. There are a few exceptions to the PMI. If your loan is classed as "high-risk" your PMI may continue. Should your payments on the mortgage not be current and if you have a lien on your property, your PMI may continue. But again these rules are only applicable if you purchased your home after August 1999.
Say your loan was for $100,000 and your put ten percent down, $10,000 then your PMI monthly payment would be around $40. If you cancel your PMI, you could save up to $500 dollars in a year and thousands of dollars over the loan.
At the closing of the loan as well as every year, new borrows should be informed about their PMI termination and cancellation rights. In addition the borrower should receive a phone number to call for more information about their PMI.
Have an opinion or a question you would like me to answer, then write me!
http://www.CarlHampton.com
"Your" Money Matters By Carl Hampton
Author of "From Credit Despair To Credit Millionaire"
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