Purchasing a home is a major expense that requires a significant and long term financial commitment. When you initially apply for a mortgage, you are approved for loan funding based on your financial status at the time of application. Most people do not expect that their financial situations will get worse over time, but in some cases that is exactly what happens. Whether through the loss of employment or the death of a family member, it is an unfortunate fact that many people find themselves in situations that keep them from being able to keep up with their home loan payments.

Importance of Mortgage Protection Insurance

For many families, making mortgage payments would become difficult or even impossible in the event of the death of one or more members of the household. Before investing in a home, it is important to stop and think about how the house payments could be made if a major source of household income were to become permanently unavailable as the result of an unanticipated death.

While no one wants to think that their family will ever face a worst case scenario, it’s necessary to make contingency plans for every possible situation. Mortgages are such a large expense that it is important to consider how one’s family would be able to avoid the threat of foreclosure, in addition to losing a loved one, if such a situation were to arise. Fortunately, it is possible to protect your family from having to face the possibility of such a situation by investing in mortgage protection insurance.

Simply put, mortgage protection insurance is a life insurance policy that will pay off your mortgage following the death of one or more covered individuals. The primary purpose of this type of coverage is to reduce the financial burden placed on surviving family members following the death of a loved one. Homeowners who invest in this type of insurance coverage are making an important commitment to their families. This type of converge can ensure that one’s family will never be forced out of its home as the result of income loss following the death of a family member.

Who Needs Mortgage Protection Insurance?

In single income households, or families in which one partner earns the majority of the money, many people think that the only covered life needs to be that of the primary breadwinner. However, it is likely that the death of a non-working spouse, or one who works part time, can also have a serious impact on a family’s ability to continue to afford to make mortgage loan payments.

Many people make the mistake of focusing only on income loss following death. They neglect to think about the expenses that will increase if either adult household member is no longer around. For example, if the non-working spouse is staying home with young children, the family does not have to pay for full-time child care. However, if that parent were no longer there, the working parent would have to pay for child care, which is a significant expense, in order to continue working.

Where to Get Mortgage Protection Insurance

There are a number of different options for making sure that your family remains financially able to stay in its home following the unexpected death of one or more members of the household. Many banks and other lenders offer mortgage protection insurance policies that can be purchased at the time you close on your home loan.

These types of policies are specific to one’s mortgage, and proceeds are disbursed to pay off the remaining loan balance upon the occurrence of a covered event. It is also possible that the company who carries your homeowners’ coverage offers a mortgage protection policy. Payments for these types of polices can generally be included in the escrow payments for homeowners insurance and property taxes that are included in your monthly house payment.

Another mortgage protection insurance option, however, is to take out term life policies on the adult members of the household. These types of policies put more control in the hands of the surviving family members. Policy proceeds can be used to pay off the mortgage in a lump sum, as with a traditional mortgage protection insurance policy, or the individual can choose to continue making monthly payments while investing or otherwise utilizing the remaining funds.

No matter which coverage option you select, the important thing is to make sure that your family is protected even under the worst possible circumstances. When you think about the alternative, the cost of mortgage protection insurance really seems to be quite small. When you purchase mortgage insurance protection, you are investing in peace of mind for yourself and for your family.

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• Beginner’s Guide To Obtaining Mortgage Quotes

Mortgage quotes are a dime a dozen. So are mortgage companies, running the whole gamut from legitimate brokers to fly-by-night lenders. To make sure you get the best deal and ensure you do not fall prey to unscrupulous brokers, learn basic mortgage terms and concepts.

Mortgaging 101

Mortgaging is a complex process. Its basic terms and concepts, however, are simple enough for anyone to understand. Brush up on this little stash of knowledge as they will come in handy in your dealings with mortgage companies.

Below are a few terms and a little explanation of what they mean.

Loan Term

The loan term is the amount of time you are given to repay the loan. The usual choices are 15 and 30 years. “Term of repayment” is another word for “loan term.”

Interest Rate

The interest rate of your loan is how much it costs you to borrow the money. This is computed as a percentage of the loan amount, charged over a certain period. In shopping for mortgage quotes, you will encounter two types of interest rates, fixed-rate and adjustable-rate. In fixed rate mortgage, the interest rate stays the same all throughout the lifetime of the loan. In adjustable-rate mortgage, the interest rate starts small and gradually increases over the loan life.

Additional Fees

In obtaining mortgage quotes, you will come to discover that the loan amount and interest are not the only sums you have to pay. There are additional charges, too, and most of them are fees incurred during loan processing.

Annual Percentage Rate

The Annual Percentage Rate, or APR, is the total sum you have to pay. This includes mortgage interest rate and additional fees. When shopping around for mortgage quotes, pay attention to the APR. APR comparison will tell you which lender is offering you a more cost-efficient loan. Some lenders try to make their quotes more attractive by giving you low interest rates but require you to pay higher fees.

Contingencies

A typical contract contains clauses that mandate inspection of key areas of the house before the actual purchase. These clauses are called contingencies. Ask about contingencies while obtaining mortgage quotes.

Mortgage Lender Versus Mortgage Broker

To the uninitiated, it may seem ridiculous to have to choose between a mortgage lender and a mortgage broker. After all, the end result is the same. Those in the know, however, can tell you that a mortgage lender is not the same as a mortgage broker. A lender is an official at a lending institution who will lend you money for your house. A broker, on the other hand, is one who will shop around for you so you can have mortgage loan options to choose from. In the short run, it is easier to deal with a mortgage lender. In the long run, however, it might be better to deal with a mortgage broker because he may be able to provide you with better deals. The best thing you can do before taking out a mortgage is to compare mortgage quotes from both mortgage lenders and mortgage brokers.

It’s important that you take your time to study all you can about the transaction and the market before signing anything. This way, you can make responsible and informed decisions.

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