New Gap Insurance May Protect Your Home’s Value
Through a new type of insurance coverage, referred to as “Underwater Mortgage Insurance”, offered by AmTrust Financial Services, home owners now can protect the value of their home from a drop in prices on the real estate market. The insurance is expected to debut on a limited scale in December 2013. However, coverage will be available nationwide by the end of 2014. While the recovering housing market has lifted 5 million home owners out of a negative equity position, still, 21% of all home mortgages are under water. Unfortunately, the coverage is not available to those who are presently in a negative equity position.
This new gap insurance enables you to recover the “negative equity” of your home if you must sell during a down market. However, there are conditions which must apply in order to obtain coverage. In order to qualify for the policy, the homeowner must have 10% equity in their home and they may not refinance for the purpose of taking money out of the home. Under the term of this policy, the insurance company pays off the lender in the event that the home falls into a negative equity position during a down market. Premium costs, on average, will run about $40-$50 monthly.
The program has not been embraced by all housing experts. Some believe it plays on the fears of homeowners and maintain that it would be better to pay the $40-$50 monthly directly to the lender in order to accelerate the repayment of the loan