Mortgage Insurance No Stress Reliever.
2008
The global credit meltdown has bought all forms of mortgage and mortgage guarantee insurance firmly into the lime light. However the mortgage insurance they are talking about in the US is significantly different to the Australian version.
Under the Australian Consumer Credit Code if you are borrowing 80% lvr or more of the value of a property a lender can require you to take out this insurance. Mortgage insurance does not protect you the borrower or your interest in your property. Rather, It protects the mortgage lender in the event that you default on the loan and they have to resort to a mortgagee sale of your property. The lender will recover the difference or shortfall from the insurer if the amount you still owe after the sale is greater than the home loan to be repaid.
Mortgage insurance or mortgage guarantee insurance is usually a one-off premium paid at the time of settlement. If mortgage insurance pays out, for you this will not be the end of the matter, as the
insurance company will pursue you to recover their money.
I think paying this type of insurance to borrow money for a home is old hat. Save your deposit or ask for your inheritance from your parents in advance. A competent mortgage broker will have some alternatives for you to consider ahead of paying mortgage insurance. Finally, please don’t be in a rush to buy your property. Take your time. Property is a great long term investment.
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