Mortgage guarantee insurance or MGI is a precaution worth taking, as it can come in handy when you are unable to pay your mortgage repayments due to ill health or an accident. It saves you the stress of having to pay mortgages when you have mounting expenses associated with treatment or when you have no income for a certain period of time.
People often think that it need not apply to them, that they are safe, but one cannot guarantee that they will always be safe from ill health or other serious circumstances. The correct policy at the best possible price is a safety net incase things go wrong and mortgage lenders accept lesser down payments than usual.
How It Helps Homeowners
Mortgage guarantee insurance agencies usually check the qualifications of the borrower and the value of the collateral provided by the purchased property. When the homeowner defaults on paying the mortgage and the proceeds from the sale of the property are not enough to cover the remaining debt plus the costs, the mortgage guarantee insurance company pays the lender the amount that is short and the costs. The MGI agencies usually offer coverage for a predetermined amount of time, which can be sufficient for the homeowner to recover and get back to work.
Mortgage guarantee insurance usually offers protection to lenders from defaults by homeowners who have less than 20% equity interest in the mortgaged property. This has made it possible for people to own homes with very little initial investments.
People used to prefer government insurance agencies, but today almost three quarters of the market is dominated by the private sector. The study has shown however that there is not much difference in the premium offered by the various companies, so customers are not given much of a choice. Mortgage guarantee insurance has enabled more people to become homeowners and minimized the risk that mortgage lenders used to take.
Homeowners rest easy that mortgage payments need not be a worry in case something terrible happens and lenders, due to the security of insurance, are willing to lend money more readily.
Mortgage guarantee insurance is offered through programs administered by the Federal Housing Administration and the Department of Veterans Affairs as well as many private agencies. Shop around until you get the best deal at the lowest price possible, Use the Internet to get quotes from different agencies and make your choice so that you get the best deal possible. It will not cost much for a person with a regular well paying job to go for the security offered by Mortgage guarantee insurance.
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David Gass is President of Business Credit Services, Inc. His company publishes a free weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com.