Buying a property for the very first time can be perplexing, particularly when you’re attempting to decipher house-buying jargon. When learning about the sort of insurance you need to buy, don’t mix up home insurance and mortgage insurance. The experts at Altra Insurance Services, a leading provider of home insurance San Diego residents can rely on, explain how these two types of insurance are quite different.
What’s Home Insurance?
This type of insurance protects you financially if your house and possessions are destroyed or damaged. This covers damages from things like fires, tornadoes, blasts, and rioting. Sheds, fences, trees, and shrubs are all covered by standard homeowners insurance plans. If you take out a mortgage, your lender will want you to have home insurance to safeguard their financial investment in the property.
What’s Mortgage Insurance?
This insurance is sometimes required by a mortgage provider and protects them in the event you default on your loan. Mortgage insurance doesn’t cover your property or your financial stake in it. For instance, unlike home insurance, it doesn’t cover damaged furniture. It only protects the mortgage company if you’re unable to make your mortgage payments.
Home Insurance Lender Requirements
Mortgage providers usually require you to get home insurance before they’ll finance your loan. Because a lender has a financial stake in your house, they want to ensure their investment is safe if anything like a fire destroys your home.
Mortgage Insurance Lender Requirements
While home insurance may be required, you can normally avoid mortgage insurance if you make a down payment of 20 percent or more of the home’s appraised worth. Depending on the type of mortgage you apply for, mortgage providers will require different forms of mortgage insurance. For instance, traditional loans may require you to acquire private mortgage insurance if you make a down payment of less than 20 percent of the appraised value.
Homeowners Insurance Payments
Home insurance and mortgage payments are occasionally combined into one payment. Some creditors insist you must have an escrow arrangement. Typically, the mortgage company collects the money as part of your loan payment, deposits the money in the escrow account, and then pays your homeowners insurance provider on your behalf. The lender can ensure your homeowners insurance is paid on time by establishing this escrow account.
Mortgage Insurance Payments
How you make mortgage insurance payments is determined by the sort of loan you have. If you must purchase private mortgage insurance, the mortgage company may let you pick between an up-front payment and monthly payments attached to your mortgage.
Purchasing a house is likely to be one of the most significant events in your life. Your house and its contents are protected by homeowners insurance. On the other hand, if you cannot make the mortgage payments, mortgage insurance will apply. Depending on your situation, one or both of these safeguards may be necessary.
For reliable, affordable homeowners insurance, San Diego homeowners know they can trust Altra Insurance Services. We also provide renters, commercial, motorcycle, and auto insurance. San Diego residents can receive a free quote by calling one of our friendly agents today at (800) 719-9972.