I have just taken a home loan. One of my friend adviced me to take home loan insurance. Another is advicing to take term insurance so that it will also will for the duration of home loan. Is there any difference in functionality of both.
Home loan insurance is just a wrapper to sell term insurance at high rate. It is just a reducing term insurance (the insure amount reduces as you pay EMI). It is always better to go for pure term insurance.
Why would a home loan insurance company audit a loan file?
I purchased my first home in June, 2007. Because it's my first home, I was required to obtain loan insurance (this was all arranged by the settlement company and/or the mortgage company) A few days ago, my employer received a request for verification of employment and wages from NIA consulting, who represents RMIC (the home loan insurance company) in auditing my loan file. My question is, why would they need to do this if I've had my home for over a year and a half now? Shouldn't this have been done before I bought my home? What purpose does this informations serve? With all this fraudulent loan talk going on at the present time, I certainly would not want a mistake to be found in my loan, and then loose my home.
Considering that the whole loan process was pretty "hands off" for me --- I was told everything would be taken care of ---, and at that time all I cared about was getting a house. By "hands off" I mean that I gave them all of my paperwork as far as wages and ID are concerned, and then just went in and signed the settlement package. In Maryland, all first time home buyers are required to have mortgage insurance. This insurance protects lenders from losses due to defaults on first mortgages for single family residential properties. My mortgage is 5 year interest only---so I definitely don't have ANYWHERE NEAR 20% equity.
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