How much does mortgage insurance cost? – Insurance Loan
The dream of every man, especially honeymooners, is to have their own angle, which is a house or flat. A mortgage is often one of the first such serious joint decisions.
Young marriages often cannot afford a new life together to buy or build a new house, which is why they are forced to make an important decision at the very beginning, including their future life – taking a mortgage. Using mortgage insurance we have a guarantee that the loan will be repaid despite unexpected events, i.e. loss of work capacity, its total loss, death or loss of real estate.
In such difficult situations, it is worth considering the possibility of paying off a mortgage or a consolidation loan. However, insurance always saves you from harsh random situations.
Mortgage loans for banks are daily bread
Banks are currently outdoing each other in gaining clients for mortgage insurance by creating packages in which the mortgage is combined with various types of insurance.
In the era of market fluctuations, when we take out a loan, we are becoming convinced that we should protect ourselves and our family against random events. Long-term obligations are particularly high risk. However, we are not always aware of how much insurance we will have to deal with.
Various policies will be related to our loan, some of them are compulsory, e.g. fire and water insurance, and some are only necessary for other borrowers such as low down payment insurance. There are also voluntary insurance, e.g. against job loss.
Types of mortgage insurance
Types of insurance that are associated with a mortgage and affect the price of the insurance premium:
it is required and paid for all the time the mortgage is repaid, it is popularly called flat, fire and water insurance. The average cost is around 0.08% of the property value per year, but only for wall protection. We will pay more if we want to provide additional protection, e.g. against burglary, theft and destruction of property. In the event that we do not purchase insurance from the bank, we must remember to provide once a year information on the possession of insurance.
Low own contribution insurance
it is not mandatory if we have the required own contribution by the bank; if the contribution is less than 20% then we also need to have this insurance. The premium is 3% of the amount of the missing contribution and is calculated in 3 years in advance.
it protects the bank when a mortgage on the property has not been established within a specified period. The mortgage is not secured by a mortgage, so there may be a risk of problems with getting the money back. Bridging insurance is the highest if the purchased flat is under construction.
Life insurance, against job loss, accidents and more
they are usually not compulsory. Life insurance may be required when the borrower finishes paying off the loan over the age of 70.
In practice, the interest rate and margin have a big impact on the attractiveness of the bank’s mortgage offer, but not only, there are many factors affecting it. In such cases, it is worth using the advice of a financial adviser. Let’s examine the price offers for mortgage insurance in several banks.
Mortgage insurance – bank offers
- Alior Bank imposes on us the obligation to take out life insurance at the very beginning, its cost is 9.6% of the loan value and it is valid only for 5 years, therefore we have to take out an additional policy for the entire duration of the loan against loss of job, temporary inability to work, for life. At the beginning, the monthly contribution is PLN 123.
- The cross-sell loan offer for Kredyt Bank requires a monthly contribution of 0.034% of the debt for life insurance, in addition, the bank may provide us with a 0.0665% unemployment insurance fee. When we add a monthly contribution to each other, we will receive such a large sum that most of us may not be aware of it.
- When analyzing MultiBank’s offer regarding sickness insurance, hospital stay or surgery, we note that this insurance costs 1.4% of the loan amount for 2 years, however this premium is later increased to 4% of the installment.