Mortgage and Insurance: Should They Always Stay Together?

James Henry Abrina By James Henry Abrina, 2nd Sep 2010 | Follow this author | RSS Feed | Short URL http://nut.bz/1ggfl8xa/
Posted in Wikinut>Money>Mortgages

Having an insurance is quite helpful during times of calamtiy. But paying for it during peaceful times can be distressing and heavy. Should you avail a house insurance together with your mortgage and take both the benefits and risks on your finances?

Mortgage and Insurance: Should They Always Stay Together?

Amortizations for mortgage loans cover insurance most often than not. This is an additional expense and contract price, but the benefit can really be helpful especially in a time when nature is at her moodiest state. Insurance is a term in mortgage that may be optional depending on the debtor's discretion. However, you may find your lender forcing you to avail an insurance policy not mainly as a security on your part but as a security on their side. This is not illegal. As a matter of fact, the federal law is even encouraging families to get one as having a fully devastated neighbor without the capability to rise from calamities will just turn to be liability to the government. On the business sector, insurance policies in mortgage plans is the assurance from having their investments turn into ashes. Also, in case your house is damaged and you can no longer pay for the amortization, the lender can use the insurance to repair damage before reselling.

If you are staying in an area known to be a High Flood Risk Zone, you are automatically mandated by the federal law to have one. Unless you can prove that you are more than capable of repairing future damages if ever, then you can get away with it. In case that you are not able to pay the designated 20% down payment on your home purchase in full, most lenders will also charge you additional fee for a private mortgage insurance (PMI).

In the long run, availing a mortgage loan with insurance is better than not having any kind of security at all. Should there be a calamity and you are unfortunate to be a victim, fixing the damages will no longer be problem as your policy will cover all the expenses. There is no need for you to spend your alloted budget for the amortization for the sake of a major home overhaul.

More affordable insurance policies are also being offered when packaged in a mortgage. You need to spend a little higher if you will avail a separate policy than the loan. If availing one is heavy for your pocket, you can always choose among different plans with different coverage. There are also flood insurances that are exclusively usable for floods alone. This type of loan comes in cheaper price compared to all around ones.

Always keep in mind that insurance policies are not security for the house itself, but from further expenses during unexpected events. Having this kind of security also gives peace of mind but not confidence in finishing the contract. Hard work and discipline is still needed. Compromising your dues will just leave you problematic so always know your debt.

Tags

Amortization, Bank, Cash, Debt, Finance, Housing Loan, Insurance, Loan, Money, Mortgage

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author avatar James Henry Abrina
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Comments

author avatar Pinkchic18
3rd Sep 2010 (#)

Very informational and useful. Good post!

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