Each person when buying a property on credit wants to save as much as possible. Such a desire is quite justified, because today interest rates are at a fairly high level. In addition, you have to deal with various additional items of expenditure, because of which the cost of housing increases significantly. One of those is insurance. Some banks refuse to provide credit without him, while others offer worse conditions. Therefore, many citizens have a question about whether insurance on a mortgage is mandatory or not. Let's look at this issue in more detail and find out why this service is needed, whether it can be abandoned and how it could be fraught.
general information
Before you talk about whether insurance is mandatory for a mortgage or not, you need to understand its purpose. This is very important, since most borrowers have a negative attitude towards it, believing that financial institutions are trying to forcibly impose this service in order to increase their own profits. This is partly true, but there are interests of the client himself. Among the main advantages of mortgage insurance are the following:
- the possibility of receiving monetary compensation in the event of damage or loss of real estate;
- protection from fraudsters, the ability to pay off debts and return the money already paid by SK;
- preservation of the apartment in case of insolvency resulting from disability or death;
- the opportunity to obtain more favorable credit conditions when purchasing additional services.
However, there are not only pluses, but also disadvantages that should also be taken into account. Among the main ones, the following can be distinguished:
- rise in price of housing;
- it is not always possible to prove that a particular case falls into the category of insurance.
That is why many people have the question of whether life insurance is mandatory for a mortgage. Indeed, if a specific situation is recognized by the UK as an unforeseen agreement, then you can’t get any compensation, and your money will be thrown to the wind. To avoid many problems, it is necessary to carefully study all the conditions of lending.
Mandatory or not?
Is mortgage insurance obligatory or not? This is a very important aspect when buying real estate on credit, because each bank requires borrowers to purchase several types of services at once, which is quite easy to get involved in. The fact is that some types of insurance are an integral part of the mortgage, while others can be waived legally. However, in this case, you run the risk of encountering some problems, for example, an increased interest rate. To avoid this, you must be well versed in all the nuances and subtleties. This will be discussed in more detail below.
What does the law say?
To fully disclose the question of whether insurance is mandatory for a mortgage or not, you need to study the main legal aspects. According to Russian law, real estate pledged must be insured against all kinds of risks. If for some reason the borrower did not bother about this on his own, then the creditor should do it for him. However, in the latter case, the financial institution reserves the right to recover the full amount from it.
Thus, home insurance for its purchase in a mortgage is mandatory, and there is no escape from this. This issue is regulated at the state level, so it will not work to evade it. The only thing that depends on you is the choice of specific services. You have the right to refuse everything that is not provided for by law.
Bank Requirements
As practice shows, credit organizations do not always take into account the interests of customers, so they try to impose as many services on them as possible. To avoid fraud, everyone should know what insurance is required for a mortgage. A detailed answer will be given a little later, but for now, let's find out what exactly banks require from borrowers. Most often, when concluding an agreement, they force them to buy the following types of insurance:
- damage and loss of housing;
- loss of ownership as a result of fraudulent activities;
- life and health.
But you are not required to purchase insurance covering all of the above cases. What you can refuse, you will learn further.
What types of insurance are required for a mortgage
At the conclusion of the contract, the loan officer will try to sell you as many related services as possible. The manager is not to blame for this, because this is his job. But you can refuse everything that you do not need and that is not provided for by law. What insurance is required for a mortgage? Only two - from damage or loss of property, as well as life and health. Whether you want it or not, you will have to pay for them. The first type covers the following risks:
- damage to the sewer system and water supply system;
- fire;
- illegal actions of intruders;
- destruction of an apartment as a result of a terrorist act, natural disaster, an explosion of domestic gas, and so on.
Mortgage life insurance is also required. Rather, it can be waived in some cases, but the law leaves banks with the right to force a client to purchase a service. It includes:
- getting disabilities of I and II groups;
- fatal outcome;
- severe diseases, the treatment of which is carried out for more than thirty days.
However, in practice, not everything is as simple as we would like. To receive monetary compensation, it is necessary to prove that the accident really falls under the category of insurance, and this is very often a problem. Therefore, before contacting the UK, it is better to immediately prepare documents that will allow you to defend your rights.
How often do I have to pay insurance?
Taking housing on credit, you conclude an agreement with the UK. You can choose it yourself or use the option that the bank offers. Today, many financial organizations have their own insurance units, so the terms of service in them may be more favorable. Do not rush and recklessly make a decision. Explore all the available offers and select the most advantageous of them.
As for the insurance itself, in most cases it needs to be renewed every year. But here it all depends on the conditions of mortgage lending prescribed in the contract. The policy can be issued not for one, but for several years. At the same time, the borrower is obliged to fulfill his obligations implicitly, since penalties are provided for evading them.
What will be the refusal to take out insurance?
If we are talking about mandatory products prescribed by law, then purchases cannot be avoided. As for additional services, it is possible to refuse, but this is fraught with certain consequences. So, for example, many people are faced with the following:
- bank refusal to issue a loan;
- higher credit rates.
In addition, if you lose your apartment for a reason not covered by basic insurance, you will find yourself in a very difficult situation, because you will have nowhere to live, and you will have to repay the debt.
Can I refuse to apply for a loan?
As mentioned above, insurance of an apartment in a mortgage is mandatory in case of damage or loss. You can refuse any additional services, since they are exclusively voluntary in nature, and the forced imposition of financial institutions is considered a gross violation of the law.
You can refuse both at registration of a mortgage, and after it. But in this case, the bank will recalculate the terms of the loan. In the first case, everything is very simple. You simply inform the manager of your reluctance, and he does not include any related services in the contract. In case of cancellation of insurance after applying for a loan, you must submit an application of the established form, attaching the following documents to it:
- copy of the policy;
- the contract;
- gross premium receipts.
Now it’s clear whether it is necessary to pay mortgage insurance, as well as how to refuse it legally. But you have to think it over carefully, because no one can know what will happen to him tomorrow. A purchase of real estate on credit creates a big burden on the family budget, so if you get a disability at work or become seriously ill, then it will be quite difficult to cope with it.
How much does insurance cost?
All insurance companies offer different conditions and prices, so it is impossible to name the exact amount. Among the main criteria affecting the cost, the following can be distinguished:
- property value;
- technical condition;
- insurance period;
- the presence of previous transactions.
If you want to save, then instead of the standard program, it is better to choose comprehensive insurance. It includes a full range of services, so SK provides a good discount. With it, you can not only protect yourself from all possible risks, but also get significant benefits.
Mortgages from Sberbank
This bank is the undisputed leader in the domestic market. As official statistics show, more than half of the citizens of the Russian Federation are served in it. What insurance is required for a mortgage at Sberbank? The Bank is state owned and is subject to applicable law. Therefore, you will need to purchase a standard product that covers housing damage or loss due to fire or natural disasters. However, according to experts, it is better to use the services of other insurance companies, since Sberbank has too high rates. But managers will try to persuade you to buy a policy from them, so you can try to agree on the provision of more favorable credit conditions.
But this bank has one big plus. When registering a mortgage in Sberbank, life insurance is not always required. No one will force you to draw it up or include it in the contract without your knowledge. In this regard, everything is very honest and transparent.
What will happen if you do not make annual payments?
If you decide to purchase a home on credit, you must pay mortgage insurance. There is no way to avoid this, and in case of refusal to fulfill obligations, certain consequences await you. They may be as follows:
- constant calls from the bank;
- increase in interest rates on loans;
- monetary penalties;
- harassment by collectors;
- trial.
Thus, the consequences are quite serious, so it is better to properly fulfill your obligations. This will allow you to avoid many problems in the future.
Conclusion
In conclusion, it is worth noting that the benefits of mortgage insurance are not only banks, but also borrowers. Therefore, you should not save on it, especially if the property is taken on credit for a long time. But the choice, of course, is yours.