Term Of The Day: Mortgage Insurance
Mortgage insurance is an insurance policy that covers the loss of mortgage lenders when the borrower defaults on the payment. Mortgage Insurance is also offered to borrowers to protect them when they default on the payment, if the reasons are genuine.
PropTiger Explains Mortgage Insurance
In India, mortgage insurance became common only in the recent past. It is also known as mortgage guarantee. Both government and private institutions offer mortgage insurance plans.
In some mortgage insurance policies, your payout declines when your outstanding liabilities decline. But, there are mortgage insurance policies that stipulate a flat payment schedule too. If the insurance premium is paid by the lender, the plan is called "lender's mortgage insurance".
Globally, there is general agreement that if your Loan-to-Value ratio is greater than 0.8, you should subscribe to a mortgage insurance policy. Once home owners pay 20% or more of the value of the home, they can request a cancellation of their insurance policy, depending on the bank and where they live.
The Life Insurance Corporation, for instance, offers The Mortgage Redemption Assurance Policy that ensures that the outstanding debt of a person is paid off if the person dies before the loan tenure period is over.
Check out PropGuide's comprehensive guide to real estate terms here.
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