Mortgage Insurance made simple
There is some confusion amongst home buyers on the topic of mortgage insurance for a property loan.
Here are some simple Mortgage Insurance Tips:
- It is generally payable where the borrower has less than a 20% deposit plus costs for the purchase of a property.
- The premium is payable once only (except see below) and in many cases can be added to the loan at settlement. That way it is paid off over time with the loan.
- Mortgage insurance protects the bank not the borrower. The borrower pays the premium so the bank is covered in case the loan goes bad.
- Usually the smaller the deposit, the higher the insurance premium.
- Mortgage insurance currently is not transferable between lenders. If you borrow from Bank A to buy a property and decide to switch the loan to Bank B, mortgage insurance will be payable again if the loan balance is greater than 80% of the value of the property at the time of the switch.
Mortgage insurance is usually more applicable to first home buyers, as they are saving for the required deposit. If you have any questions or if anything is not clear, give me a ring or send an email and I will help you.