Mortgage Insurance
There has been much discussion on mortgage insurance over the years, and we would just like to clarify some issues.
Up until the credit crisis, it was almost the ‘custom’ that the banks would lend you money on a residential property if you had 20% deposit. If you did not, then the bank required mortgage insurance against the loan.
Where there has often been some misunderstanding is that the mortgage insurance is there to cover the bank’s loan, not the owner of the property.
Because of the risk to the payment of mortgages since the credit crisis, many mortgage insurers are not insuring loans that only have a 20% deposit, but are requiring up to 40% in some cases. The reason for this is they feel that they would be paying out too often if property values decrease. This is their way of protecting their own investments.
Therefore, even though you may pass the bank’s criteria for a loan, it may be the mortgage lender that crashes your finance.
Topics: Investment Tips |
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