The most common scam there is, and surprisingly, still, nobody is talking about mortgage insurance, also known as shortly Lenders Mortgage Insurance LMI. What is the reason?
I have asked the students in my real estate investment class and ordinary home buyers this question hundreds of times. One knows necessarily what the coverage is all about. Many people believe that they should have insurance because owing to disease or job losses, they do not have any knowledge of default on their mortgage payments. They’re just paying for it without any doubt, as they want to go to the house, and the bank/lender said they have to. When the same people ask them for advice, the same thing is said: “You have to pay it?”
Could I put it another way, claim that I was going to ask you to pay for my insurance to protect me from something you could do in the future, and to save me from my dumbness! Do you want to do that? I can only imagine you screaming “HELL NO,” but that’s what the bank is asking you to pay for their insurance in order to protect them from potential misfortunes, such as the default on the loan. Surprisingly enough, every time a loan is entered, you and the majority of lenders do just that without doubt. When is enough, is enough?
It would be awesome as a business owner if I could pressure my customers to protect me against my bad business decisions or any bad decision I make that might cost me financially. It’d be good now, right? But if a business owner wanted to do just that they’d have consumers running around and governments legislating to prevent this from happening, then why did the banks and/or creditors get away with this rort?
The explanation is that we as lenders did not complain and walked better yet, causing the banks to re-evaluate and be fairer. Let’s take a closer look at this scheme. When a person wants to borrow money to buy an investment property or their own house, the banks ask them to provide copious amounts of information including how much they earn and how much of a deposit they have at their disposal, the banks often look at the borrowers ‘ credit history and their savings history.
Now here’s the twist the bank lends you say $369,000.00 they’re going to charge you around $6,500.00 in mortgage insurance premiums so they can pay their insurance, something they’ve got to do as a normal business component. Note that banks are in the borrowing business of buying money for a price and reselling it to you at a higher price this gap is called the margin and varies depending on your calculated risk, lower risk should be a lower margin. The bank would be out of business in the blink of an eye because lending money is the business of the lender if the customer did not borrow money from them or use their credit card facilities.
As consumers we strike a tough deal when dealing with any other suppliers, seeking the best deal possible, yet when dealing with the banks we take whatever the banks want to dish up to us on any given day, yes we might grumble, but we never take action and ask for better, little wonder they get away charging us for their insurance.
It’s a misconception that there’s mortgage coverage to cover you when you default. This is misleading, the truth is that it protects the lender, and the loan lenders would turn around and sue you for the difference and all expenses if there is any loss. Go the photo.
If you want to change the loan; say you want to use the equity to buy an investment property, the mortgage insurance (that’s the full amount on the top-up plus the new loan for the new property) will be recharged by the banks again, not just pro-rata. What an outrage!
One thing lenders won’t tell you about mortgage insurance is that you’re entitled to a refund of the premium if you pay out the loan early, and for those who are smart enough to find out the banks make it extremely difficult, with all sorts of excuses as to why no reimbursement is due. Never give up, keep writing and take it to the highest possible level if appropriate. The sooner the user makes a lot of mess and noise, the sooner the stage becomes the playground for home borrowers.
The crazy thing is that you can go out and buy a luxury car for say $375,000.00 and your loan will be accepted with a minimum amount of hassle (provided you can afford repayments) and the same interest rate you would have paid on your home loan, and guess what no mortgage insurance! What’s the difference, certainly as we are led to believe that real estate is a better investment than a motor vehicle? So why the intimidation and the difficulty of buying a so-called safe and stable investment? Like the property?
Tip: Ask your bank questions DEMAND THAT you see the mortgage insurance valuations and explanation. Refuse to pay the mortgage insurance and adjust the documents as necessary (yes, you can alter the mortgage documents to match you, it’s not all up to the lender, get a good attorney who knows what they’re all about) and be willing to leave.
I declined my loans and still got them, so you can. Never give up or allow banks to bully yourself. I refused and still got my loans, so can you. Never give up or allow your self to be bullied by banks.
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