by
Carl Hampton
10/09/2006
Do you want to buy a house but are
worried about how you will pay for it? Of
course you are and as scary as the cost of
loans are at the moment there is no need to
worry because your loans are protected. When
you start looking into mortgage or personal
loans you will discover the term “credit
insurance”. Credit insurance protects the
loan on the chance that you can't make your
payments but it is usually optional.
There are four forms of credit insurance:
credit life, credit disability, involuntary
unemployment, and credit property. Credit
life insurance means that all of your loan
will be paid off if you were to die. Credit
disability insurance will make payments for
you if you were injured or become ill.
Involuntary unemployment insurance makes
your payments if you were to loose your job
– if you are not at fault. Credit property
insurance protects your personal belongings
if stolen or destroyed in an accident.
As great as this all sounds you really must
be very careful before buying, make sure you
are getting what you want and it really does
cover what you need covered. keep asking
questions until you get all the answers you
need and please make sure you get it in
writing. Credit insurance is normally very
expensive so before you make a decision ask
what the premiums are. Fine out if it will
financed as part of the loan, can you can
make monthly payments instead of financing
the entire premium. You really need to find
out if out if the credit insurance will
cover the full length and full amount of the
loan. Finally find out if there are any
refund or cancellation policies for the
credit insurance.
Want to buy a house but you can only put 20
percent or less down? Thats okay there is
help at hand most home loan lenders will
require you to have a Private Mortgage
Insurance (PMI). If you were to default on
the loan the PMI protects the lender. In
1998 the Homeowners Protection Act (HPA) had
rules for automatic termination and borrower
cancellation of PMI on home mortgages. But
these rules only apply to those who
purchased a house after 1999. The
regulations under the HPA do not cover FHA
or VA loans.
If you bought a house after August 1999, you
should have terminated your PMI when you
reached 22 percent equity of the original
property value. Your PMI can also be
canceled when you reach 20 percent, if your
mortgage payments are made on time. There
are a few exceptions to the PMI. If your
loan is classed as “high-risk” your PMI
may continue. Should your payments on the
mortgage not be current and if you have a
lien on your property, your PMI may
continue. But again these rules are only
applicable if you purchased your home after
August 1999.
Say your loan was for $100,000 and your put
ten percent down, $10,000 then your PMI
monthly payment would be around $40. If you
cancel your PMI, you could save up to $500
dollars in a year and thousands of dollars
over the loan.
At the closing of the loan as well as every
year, new borrows should be informed about
their PMI termination and cancellation
rights. In addition the borrower should
receive a phone number to call for more
information about their PMI.
