By David Maveke
A mortgage on a home is one of the largest debts most Kenyans incur, and indeed needs to be taken seriously.
Mortgage holders need to take steps to protect their family home in the event that payments cannot be met due to death, illness or disability.
Mortgage insurance is today a compulsory financial agreement that insures the lender against loss in case the borrower fails to pay his or her mortgage. The borrower normally pays for this insurance.
An initial premium will be collected during the closing of a mortgage deal and, depending on the chosen premium plan, a monthly payment may be included in the payment of the house made to the mortgage lender.
Costs
The mortgage lender then remits the payment to the insurance firm. The cost tends to vary depending on the size and duration of the home loan as well as the age of the borrower.
Mortgage insurance has given lenders the necessary comfort to offer bigger loans to individuals. Lending money for mortgages is today less risky for most banks and for mortgage providers, meaning lower and more stable interest rates.
For the borrower, taking mortgage insurance will ensure the mortgage will be paid off in full, in the event of the homeowner’s demise or permanent disability.
While some view it as an extra burden on the homeowner, it is a means of securing a mortgage and getting you closer to the home of your dreams.
Without paying the mortgage insurance, homeowners will find it difficult to purchase a home or utilise their home equity. So what a borrower may consider a disadvantage is actually the approval factor for their loans.
Furthermore, the insurance covers mortgage payments in case you are unable to pay for your monthly mortgage due to illness, injury or long-term unemployment where the cover is extended.
Disclosure
It is recommended that homeowners also take insurance policies that cover structures on a property, including buildings as well as personal items such as furniture, electronics and clothing. Homeowners’ insurance pays for damages and loss caused by fire, weather hazards and other perils.
Disclosure of underlying health conditions is important when applying for coverage as benefits may be denied if full disclosure was not made.
Today, you can take a mortgage without undergoing a medical examination as a result of mortgage insurance — although this is limited to Sh15 million in the case of Housing Finance.
Mortgage insurance protects the homeowner who suffers a severe illness that is covered under the policy such as life threatening cancers, heart attack, stroke and kidney failure.
In a nutshell, the insurance provides peace of mind for you, knowing that your family lifestyle can continue without additional difficulties.
- The writer is the
General Manager for Mortgage Sales at Housing Finance
