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You are here: Home / Archives for Insurance

An Overview Of Private Mortgage Insurance

February 26, 2021 by Cachet Real Estate Finance

An Overview Of Private Mortgage InsuranceWhen you are going through the process of looking for a new home, you are probably focused on the sticker price of that home. Even though it is important to think about your down payment, your monthly mortgage payment, and the total amount of the loan, there are other expenses that you might need to cover as well. If you do not put down enough money, there is a chance that the lender could ask you to pay for something called private mortgage insurance. What is private mortgage insurance and how much do you have to pay? There are several important points that you should keep in mind.

Why You Might Purchase PMI

Private mortgage insurance is something that the lender may ask you to purchase as a way to reduce their risk. If you do not make a sizable down payment, then the lender is responsible for funding most of the cost of your home. If you end up defaulting on the cost of that loan, the lender will lose a major amount of money. With PMI, the lender will be able to get his or her money back in the event that you default. Even though the exact cost of PMI will vary, you should expect to pay somewhere between 0.5 percent and 2 percent of the loan. You might be able to ask the lender to check with multiple options to find the least expensive policy possible for you. Once the PMI policy is instituted, this is something that you will have to pay on top of your monthly mortgage payment.

Avoiding PMI Payments

Importantly, there are ways that you can avoid PMI. You might be able to avoid this insurance policy altogether if you are able to increase the size of your down payment. If you cannot do that, the PMI policy will usually be canceled when you reach a certain threshold in equity. This is something that you should negotiate with the lender before you sign on the dotted line. In some cases, the PMI policy as waved when you reach 10 percent of the loan amount paid back. Even though you should check with a professional accountant, PMI is likely tax-deductible, similar to mortgage insurance.

 

Filed Under: Real Estate Tagged With: Insurance, Mortgage Payments, Real Estate Tips

Remove The Flood Insurance Risk From The Closing Process

December 30, 2020 by Cachet Real Estate Finance

Remove The Flood Insurance Risk From The Closing ProcessMany homeowners do not realize that the risk of a flood is a significant factor that plays a role in not only homeownership but also the closing process. Even though flooding is a major risk, many homeowners do not carry enough coverage. Without proper flood insurance, homeowners risk losing millions of dollars. Therefore, it is prudent for those who are looking for a home to factor flood insurance into their home search. This can streamline the closing process down the road.

Exploring Options For Flood Insurance

When homeowners think about flood insurance, they are often directed to the National Flood Insurance Program (NFIP). While this is one option, there are also private options available that could provide better prices and more favorable terms. Private options exist in all 50 states in addition to the Washington DC area. They can be used to satisfy the requirements of banks, credit unions, and lenders at the time of closing.

Calculate The Risk Of Flooding

While a flood can happen at any time, some homes are in riskier locations than others. Therefore, homeowners need to take a look at the individual risk of flooding at a specific property in which they might be interested. In some cases, homes might be located in high-risk areas where flood insurance still might not be required. Homeowners need to make sure that they understand the risk of flooding of a potential property and protect it accordingly. Homeowners’ insurance usually does not cover flood events, so a separate policy is typically needed.

The Requirements Of The Lender

There are some situations where homeowners might have their closing process delayed purely because they did not realize that the lender required flood insurance. During the preapproval process, it makes sense for homeowners to ask the lender if they require flood insurance. That way, homeowners will be able to factor the cost of flood insurance into the search process and expedite their closing later.

Invest In Quality Home Insurance

For many homeowners, their home is the most valuable investment they will ever make. Therefore, it has to be protected appropriately. This includes flood insurance. Check out flood insurance options ahead of time to streamline the closing process later.

Filed Under: Real Estate Tagged With: Insurance, Protecting Your Assets, Real Estate

Purchase The Right Amount Of Home Insurance

December 29, 2020 by Cachet Real Estate Finance

Purchase The Right Amount Of Home InsuranceFor most people, their home is the most valuable investment they will ever make. Therefore, it needs to be protected. This is where homeowners’ insurance is critical. At the same time, buying the right amount of homeowners’ insurance can be a bit of a challenge.

A home that is underinsured leaves the homeowner vulnerable to situations involving fires, floods, and theft. On the other hand, nobody wants to throw away money unnecessarily by over-insuring the home. How can everyone purchase the right amount of homeowners’ insurance?

Review The Coverage Every Year

First, people’s needs are going to change from year to year. Therefore, everyone should review their policy annually. For example, actual cash value only reimburses someone based on the current condition of the home. For example, if a home was built ten years ago, the actual cash value will only provide someone with the depreciated value of the home and not the original value. While this might be enough at the beginning, it may not be enough ten years from now. Everyone has to make sure they purchase enough insurance to cover the cost of rebuilding the home, excluding the cost of the land.

Overlooking Valuables And Liability

Another common mistake that people make when it comes to homeowners’ insurance is overlooking issues such as valuables and liability. Most people have enough insurance for the structure of the home. Most people do not have enough insurance to cover liability claims and valuables. Liability claims might arise if someone gets hurt on the property and the homeowner gets sued. Valuables are important if the home burns down or if someone steals something from the home. All homeowners must have enough homeowners’ insurance to protect themselves against potential liability claims (such as someone slipping and falling in the home) and the loss of valuables (such as electronics and jewelry). Everyone has to make sure they document these valuables appropriately.

Purchase The Right Amount Of Homeowners’ Insurance

Make sure you include everything to purchase the right amount of homeowners’ insurance. Review current construction costs as part of the process. Finally, review the fine print of the homeowners’ insurance policy every year to avoid being underinsured or over-insured.

Filed Under: Real Estate Tagged With: Insurance, Real Estate, Real Estate Tips

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