Disaster Help throughthe Mortgage Insurance

When a lending agency agrees to a mortgage loan to a borrower, it does check the credibility and credit worthiness of the applicant before the loan is sanctioned. In spite of this, several cases of default happen, resulting in the lender incurring losses because of the delay or total inability in getting his money back. A big majority of the borrowers takes loans for specific purposes only after a total assessment of their financial resources and their ability to keep paying the monthly instalments without default. Unfortunately, such good intended people might also be forced to default on payment, because of some disaster that may happen in their lives.

Benefits

The disaster may be due to natural causes like a hurricane, flood or an earthquake. It can be man-made, like what happened when a steep fall took place in the general economic condition. All classes of people in all occupations have been affected by the recession. Many people with mortgage loans have lost their jobs. It makes them default on mortgage repayments. The lender is also a sufferer, because he is not able to get the money back in the normal way. He has to resort to long winded legal action with no hope of immediate relief.

There are schemes to help the borrowers to tide over this problem. The lender has to go for an insurance policy against every mortgage loan he sanctions.He requires this cover without recourse to legal action. The term mortgage insurance for disaster help, should not be confused with mortgage life insurance. By agreeing to the insurance policy at the time of mortgage, the borrower benefits to the extent that his buying power is increased, and he can confidently go for the purchase of a home.

Help To both Lender and Borrower

The mortgage disaster insurance scheme provides that the premium has to be borne by the borrower. In fact, when the loan documents are being drafted, the monthly instalments will also include insurance premium against the policy. The borrower benefits directly at the time of signing the agreement. The normal 20% down payment against home mortgage loans is reduced to 5% to 10% if you have mortgage insurance. It is of great help if you have difficulty in finding the money for down payment.

The insurance is helpful to the lender, because the borrower is committed to honour his part of the deal,which is, to pay back the loan without defaulting on the monthly instalments. The main intention of the scheme is to protect both the lender and the borrower in the event of any disaster.

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