Mortgage Insurance in Australia

Mortgage insurance in Australia is a form of protection for lenders. It is relatively useful for Australian borrowers and offers peace of mind to the lender who finances a home loan. Insurance companies provide different levels of protection against defaulting on the mortgage, or an unexpected event that causes the homeowner to become delinquent.

What is Mortgage Insurance?

The mortgage insurance is a type of property insurance and is usually required from the borrower. This form of insurance is meant to cover the loss or damage that can occur during the course of ownership. This often includes the home, contents and valued possessions within your home if it were to be lost or damaged by an act of natural disaster like fire or flood. You will have to purchase this insurance policy in order to qualify for an Australian mortgage, otherwise your loan will be declined.

Direct and Indirect Mortgage insurance:

Direct Mortgage Insurance coverage is available to all borrowers with a variable interest rate or fixed interest rate mortgage, while indirect Mortgage Insurance coverage is available to all Australian borrowers with a variable or fixed interest rate mortgage.

Residential Mortgage Insurance:

Whether you have a car loan or a house, your bank will consider mortgage insurance to be an essential part of your annual financial package. And this is one product that can definitely prove to be helpful for both the banks and their customers. As per an Article on Selling your Property by Christopher McQuaid, when I choose to buy a home, it’s important to know what they are offering me in terms of financing options. The most common type of finance is residential mortgage insurance (also called CMV ) which must be taken out before you can close on the sale of a property. This is why you’ll hear some lenders refer to it as loan coverage or security deposit coverage.

Advantages of Mortgage insurance in Australia:

Mortgage insurance protects lenders against defaulting borrowers by providing them with additional security when they make such loans. The lender gets paid if the borrower defaults on their repayment obligations. The amount paid out by lenders depends on what kind of mortgage they have taken out and how much they have borrowed. Lenders that take out mortgage insurance will pay out more than those who do not because they know there will be no consequences if the borrower defaults on their loan repayments.

Mortgage insurance premiums vary according to your loan type and the value of your property. However, in general terms it’s most common for borrowers to have their mortgage insurance premiums paid by the lender rather than through additional monthly repayments into their own account (this is known as prepayment).