Mortgage protection insurance When you might need it Always.

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Mortgage Protection Insurance

What is Mortgage Protection Insurance?

As a homeowner, you want to protect your home with affordable, comprehensive coverage.

Mortgage protection insurance is a type of term life insurance that is designed to pay off your mortgage in the event of your death. It functions like a standard term life policy: You purchase a policy for a set period, make monthly payments, and if you pass away while the policy is in force, your chosen beneficiary receives funds to pay off your mortgage. This coverage ensures that your family could stay in their home if you were no longer able to contribute to mortgage payments.

Mortgage protection insurance is right for you if you want to:

  • Protect your most valuable asset
  • Ensure your loved ones never have to deal with the fear of losing their home
  • Provide financial security if the unthinkable happens

Why Do I Need Mortgage Protection Insurance?

As a homeowner, being able to pay your mortgage on time every month is important. What would happen to your loved ones if you were to die prematurely, become disabled or critically ill, and your income suddenly disappeared? None of us know what the future will bring, but you can achieve peace of mind today with mortgage protection insurance.

Advantages of Mortgage Protection Insurance

  • Provides a death benefit to pay off your mortgage in the event of your death
  • Pays your mortgage payments if you become disabled
  • Protects your mortgage payments in the event of critical illness
  • Provides benefits from a life insurance policy with generally affordable premiums
  • Achieves peace of mind for your home and family

How Mortgage Protection Works

Mortgage protection insurance functions much like other life insurance policies: You pay premiums to the insurance company to purchase a specific amount of mortgage protection coverage. Those premiums are based on your attained age and your health, as well as the value of your home and the payoff amount. If you die while the policy is in force, the insurance company provides funds to pay off your mortgage.

Mortgage Protection Insurance:

Money goes to your family
Pays your mortgage if you become sick or injured
Money your family receives is tax free
Makes your premiums in case of job loss*
Is portable – new home? It travels with you

US long-term mortgage rates rise; 30-year fixed home loan hovers at 2.84%

US long-term mortgage rates edge higher, but fundamentals remain negative

On top of that, latest Freddie Mac data for US home loans came forth a day after the ECB had said in a statement that it had been expecting the US Central Bank to keep its interest rate at a near-zero level at least until September 2023, eventually dampening hopes of a decline in US home prices amid a steep lack of supply alongside an unyielding upsurge in demands.

Meanwhile, according to Freddie Mac data released late on Thursday, the average rate on the popular-most 30-year fixed home loans rose slightly to 2.84 per cent this week from an all-time low of 2.78 per cent, while on an annualized basis, the rate fell from an averaged 3.75 per cent recorded at the same time a year earlier.

Freddie Mac also reported that its 15-year fixed-rate mortgage had been inched higher to 2.34 per cent this week from a reading of 2.32 per cent logged last week.

Comparing 30-Year & 15-Year Fixed Rate Home Loans to ARMs

Types Of Mortgages: Which One Is The Right One?

When the homeowner approaches the lender and they begin the process of filling out the mortgage loan application, it is a very good idea to know what types of mortgages are available and the advantages and disadvantages for each of them. This article takes a look at one year adjustable rate mortgages, fixed rate mortgages, 2-step mortgages, 10/1 adjustable rate mortgages, 5/5 and 5/1 adjustable rate mortgages 3/3 and 3/1 adjustable rate mortgages, 5/25 mortgages, and balloon mortgages. Government backed programs including FHA, VA & USDA loans are briefly discussed.

Conventional Fixed Rate Mortgages

A mortgage in which the interest rate remains the same throughout the entire life of the loan is a conventional fixed rate mortgage. These loans are the most popular ones, representing over 75% of all home loans. They usually come in terms of 30, 15, or 10 years, with the 30-year option being the most popular. While the 30-year option is the most popular, a 15-year builds equity much faster.

The biggest advantage of having a fixed rate is that the homeowner knows exactly when the interest and principal payments will be for the length of the loan. This allows the homeowner to budget easier because they know that the interest rate will never change for the duration of the loan.

Not only are fixed rate mortgages the most popular of home loans, but they are also the most predictable. The rate that is agreed upon in the beginning is the rate that will be charged for the entire life of the note. The homeowner can budget because the monthly payments remain the same throughout the entire length of the loan. When rates are high and the homeowner acquires a fixed rate mortgage, the homeowner is later able to refinance when the rates go down. If the interest rates go down and the homeowner wants to refinance, the closing costs must be paid in order to do so. Some banks wishing to keep a good customer account may wave closing costs. If a buyer buys when rates are low they keep that rate locked in even if the broader interest rate environment rises. However, home buyers pay a premium for locking in certainty, as the interest rates of fixed rate loans are usually higher than on adjustable rate home loans.

The following table allows you to compare current rates and monthly payments for various common home loan types.

VA loans are guaranteed by the US Department of Veteran Affairs. They help veterans & active duty military members afford purchasing a home without requiring a down-payment by guaranteeing 20% of the loan’s value up to the conforming loan limit.

FHA Loans

Although it is true that there are several different types of mortgages making a comeback, the FHA home loan remains one of the most popular. The reasoning behind this is the multiple benefits an individual is eligible for once they qualify for this loan.

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Gift Funds. The FHA is one of the only lenders that are very proactive in protecting their applicants’ ability to accept monetary gifts for payments. An applicant can accept up to 100% of the down-payment in the form of a gift from a relative, friend, employer, charitable group, or government homebuyer program. You will have to follow the process to accept the gift though.

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Low Downpayment. One of the biggest draws to this program is the low down-payment amount. Most down payments are around 10% or higher. However, the FHA program offers down payments for as low as 3.5%. This means buyers don’t have to worry about saving as much for their down payments, and they can save their money for repairs of emergency funds.

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Many Property Types are Eligible. Unlike several mortgage lenders, the FHA is flexible on the property types that are eligible for financing. Borrowers can purchase a home in any neighborhood located in the United States, the District of Columbia, or any territory the United States holds. You can purchase a single family home, two unit homes, three and four unit homes, condominiums, mobile homes, and manufactured homes.

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No Social Security Number Required. Every home-buyer does not have a social security number. Normally, this would be something that prevented them from purchasing a home. The FHA will allow people without a valid social security number to secure a loan. This is good news for employees of the World Bank, employees of Foreign Embassies, and non-resident aliens.

USDA Loans

Rural home buyers with low to moderate incomes may qualify for USDA loans backed by the US Department of Agriculture.

Income Limits

The USDA Rural Housing Program (Section 502) guarantee program was created to help boost rural development by extending credit to people with moderate income.

Moderate income is defined as the greater of 115% of the U.S median family income or 115% of the state-wide and state non-metro median family incomes or 115/80ths of the area low-income limit. These USDA loan limits are based upon both the local market conditions and the family size. The moderate income guarantee loan limit is the same in any given area for households of 1 to 4 people & is set to another level for homes of 5 to 8 people. The following table lists examples of limits from a few select areas of the country.

Location 1 to 4 Person Limit 5 to 8 Person Limit
Fort Smith, AR-OK MSA $78,200 $103,200
Northwest Arctic Borough, AK $157,850 $208,350
Oakland-Fremont, CA HUD Metro $145,700 $192,300
San Francisco, CA HUD Metro $202,250 $266,950

The floor values on the above limits are $78,200 and $103,200 respectively. Homes with more than 8 people in them can add 8% for each additional member. You can view income limits in your local area here.

Loan Amount Limits

Loans can be used for regular, manufactured or modular homes which are no more than 2,000 square feet in size.

The effective loan limit starts at $125,500 in low-cost areas and goes as high as $508,920 in expensive parts of California.

A mortgage loan in which the interest rate changes based on a specific schedule after a “fixed period” at the beginning of the loan, is called an adjustable rate mortgage or ARM. This type of loan is considered to be riskier because the payment can change significantly. In exchange for the risk associated with an ARM, the homeowner is rewarded with an interest rate lower than that of a 30 year fixed rate. When the homeowner acquires a one year adjustable rate mortgage, what they have is a 30 year loan in which the rates change every year on the anniversary of the loan.

However, obtaining a one-year adjustable rate mortgage can allow the customer to qualify for a loan amount that is higher and therefore acquire a more valuable home. Many homeowners with extremely large mortgages can get the one year adjustable rate mortgages and refinance them each year. The low rate lets them buy a more expensive home, and they pay a lower mortgage payment so long as interest rates do not rise.