How much does mortgage insurance cost?

People who are buying a home will need to save at least 20% of the home's value as a deposit. Those who do not do this will be asked to take out mortgage insurance by their bank. This insurance exists so that the bank is protected if the borrower defaults on their home loan.

How much mortgage insurance costs

A mortgage insurance policy will cost the borrower 0.5% - 1% of the total loan amount annually. For example a home loan of 100,000 Euros will have an insurance policy that costs 1000 Euros a year. Banks often add an extra fee to this payment if the customer chooses to pay my monthly instalment instead of in one lump sum. People who have an expensive home will end up having to pay a hefty sum on mortgage insurance. However it is important to remember that there are some benefits to having this type of insurance.

What homeowners need to know about mortgage insurance

Firstly it is important for homeowners to understand that the only entity who will get paid out by this insurance is the bank. This is because mortgage insurance is a tool that banks use to protect themselves if homeowners cannot meet their mortgage repayments. In most cases the bank will agree to give a customer a home loan with the requirement that the homeowner has to take out mortgage insurance. Homeowners should be aware that mortgage insurance is not life insurance. If the homeowner was to die and all he or she had was a mortgage policy, the bank would be paid out. This means that heirs would receive no payment from the insurance company. Mortgage insurance will pay out when the homeowner has found themselves in a position where they cannot make mortgage repayments. Homeowners that are looking for life cover insurance will need to look for another products. Banks also offer their mortgage customers life assurance policies and well as personal loan insurance policies. While it may seem like the only one who benefits from this policy is the bank, homeowners also benefit. This policy allows homeowners to stay in their home if they cannot make payments. It also protects the credit rating of the homeowner by making payments on their behalf.