Mortgage insurance is a separate type of insurance. There are some peculiarities that you need to know about before signing documents for mortgages. How is a home insurance policy for a mortgage? What are the conditions and how much will it all cost? All these nuances are very worrying for a person who has little knowledge of insurance issues.
Is it necessary to insure an apartment in a mortgage
If you take a mortgage, home insurance is required. Before deciding to take this type of loan, you need to think a lot in advance. Usually, a bank requires insuring not only the housing itself, but also the life and performance of the borrower himself, because he will not take risks and will require you to pay comprehensive insurance. So a financial organization powerfully and quite legally protects its interests.
There is a federal law governing credit relations, “On a mortgage” of July 16, 1998. According to it, all real estate must be insured to minimize risks.
Without insurance, a financial institution does not formally have the right to refuse credit, but in practice, such interest is set that a person refuses to take money on such conditions. The bank is obliged to provide the client with a choice in which insurance company he will insure the apartment in the mortgage, but you cannot refuse this financial transaction.
The amount of insurance depends on the condition of the housing itself. If you decide to insure your own life, as requested by the bank, then your health will be taken into account. There are a lot of nuances of insurance for a mortgage. Let's figure it out in order.
Mortgage apartment insurance. Features and nuances
What should be envisaged when signing a mortgage loan agreement? Banks that offer mortgages usually work with several large insurance companies. You, as a client, can choose any insurance organization, but all from the list of companies that the bank itself will indicate to you.
What are the other nuances? If the client refuses to pay life insurance, bank employees are entitled in this case to raise the interest rate for housing by 1%.
After completing all the documents, you can safely get the keys to your apartment, which you take on credit. Thus, it is also beneficial for the client. He is calm, knowing that in any unforeseen situations the insurance company will bear all the costs that the bank needs to recover.
All insured events for which payments are due are indicated in the contract. You must familiarize yourself with this list.
Mortgage Insurance Types
There are several types of mortgage insurance. We will consider the features of each below, and first we list them:
- insurance object;
- the health and performance of the borrower;
- title of housing;
- borrower liability insurance.
- job losses.
It is clear that the insurance object, that is, the house or apartment itself, is insured without fail. Sudden gas explosion, fire or robbery and vandalism - all these factors that take place in our lives cannot be prevented. When assigning the amount of insurance, it plays a role, is it a new home or an old one, whether there are wooden floors, wear. Insuring non-standard housing, such as a tenehouse, will be more expensive than an ordinary apartment.
Separate mortgage conditions for those who take a military mortgage. Certain privileges are provided for military personnel, and part of their loan is paid from the state treasury. Nevertheless, in this case the military must pay for insurance, and the benefits do not apply here.
It is better to insure performance when you are in poor health or already have a chronic illness.
Title insurance
We will explain in more detail what is title insurance for an apartment. This type of insurance is needed when it is possible that you cannot have ownership of the purchased apartment. But these are rare cases. Usually, if an apartment or house is just built and does not yet have an owner, title insurance is completely unnecessary.
Such insurance guarantees the payment of a certain amount from the insurance company in the event that some documents were incorrectly executed during the purchase and sale process and your purchase will be invalid by law. Funds from the insurer are received by your credit agent, that is, the bank.
How much will the insurance company pay? The agency will pay the difference between the amount you borrowed from the bank and the real cost of housing. And only if you insured the received apartment at its full cost, and not at a partial one.
The cost of such insurance is approximately 0.5% of the total mortgage loan amount , not more. The term for the payment of insurance under the law may not exceed 3 years.
Life insurance
The main difference between such a policy is the dependence of the rate on the age of the insured person. Also, the amount will depend on factors such as the profession of the client and the general state of his health. If the client has an extreme hobby or works in a hazardous industry, then the percentage will also be high.
You can insure yourself for such cases:
- temporary disability;
- disability;
- death of the client.
If the client died in prison, at war, or voluntarily endangering his life, then the family of the deceased will be refused insurance.
There are times when your chosen bank forces you to sign a life insurance contract, even if you do not consider it necessary. What to do in this case? Pre-prepare a certificate from the hospital. If you bring a certificate stating that you are in excellent health and you do not appear in the doctor’s office, the cost of such a policy will be minimal. In addition, life insurance takes into account the age of the client. If he is under 40, the interest rate in many banks is lower than when the client is 60 years old or more. Therefore, when arranging this type of insurance, it is advisable to ask to make a calculation at once in several organizations and choose among them one that offers more favorable conditions.
Cost of home insurance with a mortgage. How to save?
In principle, you can insure housing anywhere. But in practice, this issue is very strictly regulated by the bank. If you take a simple consumer loan, bank employees will not particularly insist on insurance. But when signing a mortgage agreement, everything is much stricter. Often they choose home insurance for a mortgage at VTB 24 or at Sberbank. But where is it more profitable? Each bank has its advantages, but also its disadvantages.
If you choose life and housing insurance for a mortgage at VTB 24, you can pay the loan not for 20 years, but for 5. At the same time, the price of insurance is reduced by 25%. A special program is provided for this. However, if you choose insurance at VTB 24, you agree to pay 2 policies: for the safety of the apartment and for your own life and health.
The cost of the policy in this organization depends on which program the client chooses. The client can also choose one of the proposed types of property insurance:
- Loss of ownership.
- Intentional or unintentional damage to housing by third parties.
- Risk of participation in equity during the construction phase.
And will he want comprehensive insurance? For comprehensive insurance, all bet odds are reduced. It is possible to choose an insurance program directly on the official website of the company.
But Sberbank offers only one type of compulsory insurance - for real estate; yet other species are voluntary. But perhaps you will be asked to purchase insurance for loss of rights to housing. The average rate in this bank for this 2017 is 0.225% per year of the total amount of your loan obligations. But you can choose one of 19 other insurance organizations working together with Sberbank.
When calculating the cost of insurance of an apartment taken on a mortgage, the following factors are taken into account:
- requirements of your bank;
- loan amount;
- state of housing (technical specifications);
- total insurance period;
- the presence of previous transactions.
You can save a lot by purchasing a policy that provides comprehensive insurance. VTB 24 offers to save just that. That is, to simultaneously insure all types of insurance offered by a credit institution.
But Sberbank will make a discount on interest in the event that the client takes out life and health insurance. If your organization has already insured your health and ability to work, contact it and insure housing there. You will definitely be given a discount. A discount can be obtained if a person has changed his occupation, and his profession is no longer on the list of life-threatening ones. He will have to reduce insurance premiums when applying. If you calculate all these nuances, you can issue a policy on fairly favorable terms. But, despite all the discounts, mortgage insurance of an apartment is still a very expensive investment.
Extension of insurance contract
Insurance is paid for the entire period for which credit payments are calculated. But the contract is usually renewed every year. If all conditions remain the same and the client is satisfied with the situation, the contract is simply prolonged. But when the situation changes in something, certain changes are made to the document. For example, a client has already paid a significant portion of the loan, and its repayment period has decreased. Consequently, the amount of insurance will also decrease by a certain percentage.
Home insurance. Required documents
Of course, each organization has its own conditions, but they all obey the laws of the Russian Federation, which are uniform for all insurers. Documents to the insurance organization must be provided correctly. If you do not have experience working with financial institutions, then consult with lawyers without fail.
The list of documents in most cases is the same and includes:
- your TIN;
- statement;
- a signed mortgage agreement;
- passport or other identity papers;
- documents confirming the ownership of the housing;
- an act on the land, if you bought a house on the site.
After filing and checking all the documents, the client pays insurance and a down payment. It happens that it is convenient to sign a tripartite agreement. The parties to it will be your bank, you and the insurance company.
In order for the insurance to return the money when the insured event still occurred, the following conditions must be met:
- Bring the required documents specified in your copy of the contract.
- Pay dues on time.
- Inform the agency about the occurrence of an incident, if it is indicated in your contract.
The insurance company has the right to refuse to pay if at least one installment was paid in time.
Insurance cost
The cost for each type of insurance is different. And each bank, of course, has its own rates and its own nuances. If you agreed to mortgage insurance at Sberbank, the cost of the policy will be lower than at VTB-24, even if you make a deal with the same insurance company.
The insurance calculation formula includes the interest rate on the loan and the outstanding balance. Other nuances are also taken into account.
Payment is made only once a year. But if a client, for example, started repairing a purchased apartment and is not able to pay this amount at a time, you can agree on a breakdown. Then the contribution is divided into 4 equal parts and paid quarterly.
Insured events
The insurance company provides for several insured events, upon the occurrence of which the bank will receive the amount agreed in the contract. Mortgage insurance policy in different organizations has different costs and, accordingly, insures several possible unforeseen situations. These usually include:
- fires;
- problems with water pipes (flood);
- explosions;
- robbery with hacking;
- natural disasters;
- vandalism;
- subsidence of soil;
- flood during the rise of soil water.
Some insurers also offer home mortgage insurance in the event that a plane crashes into the building. In a word, the list of insured events can be quite wide. You choose the policy that you think is suitable. It is not worth paying for the entire list of insurance claims.
Insurance compensation
A person signs an insurance contract simultaneously with a mortgage. All conditions, including the conditions for damages, must be indicated in the contract you signed.
As for life insurance, insurance should cover the entire remaining payment amount. If the client is sick or injured because of which he cannot work, then the insurance company must pay your borrower from 50 to 70% of the amount due at that time.
Refund
If a client has already fulfilled all his financial obligations to the bank, can he get back part of the insurance, because insurance is paid at the beginning of the year, for all 12 months? If you insured at VTB, then this is possible. To do this, you just need to break the contract ahead of schedule, and part of the money will be returned to you.
Since the last (2016) year, there is a legal opportunity to demand a refund through the court if the bank has imposed some kind of insurance on you.