What is real estate mortgage insurance?
Contents
When a client purchases an apartment with a mortgage, he needs to insure this property: this is stipulated in the Federal Law “On Mortgage”. However, it is important to note that this type of insurance is imputed and not mandatory (unlike, for example, compulsory motor liability insurance). This means that the law does not specify who exactly should insure the mortgaged property; at the same time, banks simply will not issue a loan without insurance, thereby shifting worries onto the shoulders of the borrowers.
It is also necessary to pay attention to the fact that, as part of mortgage insurance, you can purchase other types of insurance coverage (in case of death or injury, title insurance, etc.), however, the bank does not have the right to refuse to issue a mortgage if the policy contains coverage for real estate only.
The object of mortgage insurance for real estate can be an ordinary apartment, a country house or a townhouse. At the same time, you can insure both new brick buildings and old wooden houses - insurers will select separate rates for them, based on the experience of previous clients. However, under a standard contract it is the real estate that is insured, and not the property in it, therefore, for example, in the event of a fire, payments for a burnt-out cabinet are not expected.
Which is better: comprehensive insurance or separate?
The client will need to take out at least two insurances - apartment and life, and if the apartment is purchased on the secondary market, then also title insurance. In this case, there are insurance policies that include two types of insurance.
In some cases, comprehensive insurance is cheaper. But since insurance rates differ in different companies, it will be more profitable for the client to insure his life with one of the insurance companies, and the apartment with another. After all, the cost of insurance is calculated for each specific borrower and can vary significantly.
How is real estate insurance provided with a mortgage?
It is impossible to take out a mortgage without having a mortgage insurance policy. In this regard, it is advisable to take care of purchasing insurance in advance, although there will be nothing wrong if you contact a large bank without an insurance contract - for example, in Alfa Bank or Sberbank insurance can be issued in the same office in a subsidiary insurance company .
Many insurers publish information on their websites about what you need to do to obtain mortgage insurance. For the convenience of clients, large insurance companies provide the opportunity to send all the necessary documents via the Internet, which significantly saves time and does not require a personal visit to the insurer until the moment the contract is signed.
In the standard case, to issue a real estate insurance policy for a mortgage, you need:
- borrower's passport
- cadastral passport
- technical floor plan
- documents that confirm ownership of the apartment
If other risks are not insured, then the client does not need to additionally provide a medical certificate of health and documents confirming the history of ownership by other owners.
What is title insurance
Title insurance is insurance of the actual ownership of an apartment, which the new owner receives upon concluding a real estate purchase and sale agreement. This type of insurance, unlike regular real estate insurance, does not provide compensation in the event that the apartment burns down, is destroyed, and so on.
Title insurance reimburses the insured person for the market value of the apartment in the event that the buyer has lost ownership of the apartment not due to his own actions, but, for example, due to a court decision, fraudulent transactions, and so on. It is this type of insurance that is rightly considered the most relevant and in demand when completing transactions for the purchase and sale of apartments on the secondary market.
Title insurance does not apply to the primary market, since when buying a home from a developer there are many fewer problems, the apartment has no previous owners and, as a result, there is no likelihood that the ownership of the home will be challenged in court.
Example: An apartment is being sold by a person who knows perfectly well that in order for the transaction to be completely legal, he must have his wife’s notarized consent. Otherwise, the spouse may challenge the deal in court and demand that the housing be returned to the previous owner, since in fact, despite the fact that the apartment is registered in her husband’s name, it is joint property. In fact, the wife is aware that the house is for sale, but she is in cahoots with her husband and plans to receive both money for the apartment and to regain the property. After the transaction is concluded and full payment is made, the fraudulent spouses go to court and regain ownership of the home. They do not return the money, declaring that it has already been spent, they have no other property, no savings, and so on. In theory, a deceived buyer can claim money through court, but this takes time, and it is not a fact that the entire amount will be returned. They may prescribe monthly payments that will last for decades. And if the buyer, when drawing up a purchase and sale agreement, also enters into a title insurance agreement, then the entire market value of the home will be reimbursed by the insurance company.
For how long can I be insured?
When it comes to mortgage insurance of real estate, companies offer fairly flexible conditions regarding the duration of the contract. When applying for a mortgage, a mandatory condition is insurance protection of the property throughout the entire loan repayment period. However, this does not mean that the insurer cannot be changed during this time.
Traditionally, insurers accept mortgage housing for a period of at least 1 year. In this case, the maximum possible insurance period is the remaining number of years until the loan is repaid. Accordingly, to manage your own risks, it is recommended to buy a policy for 1 year: if you like the insurance company, then you can always extend the contract with it; if not, then you can safely change the insurer.
How much does Alfa-Bank mortgage insurance cost?
The cost of insurance consists of various factors:
- When insuring real estate, the following is taken into account: the condition of the housing (year of construction, materials, availability of communications, etc.).
- The cost of life insurance for a mortgage depends on the gender and age of the borrower, health status, and type of activity.
- The price of title insurance is determined depending on the number of transactions for the real estate being sold.
Each of these factors can make insurance significantly more expensive. For example, if a client is of retirement age, insurance will be several times more expensive than for a young person. The same applies to health status and other factors that increase the likelihood of an insured event.
The most break-even for an insurance company are young, solvent borrowers who work in a profession that does not pose a threat to life and health. And also those who purchase an apartment in a new building.
Therefore, to make insurance cheaper, it is better to make the main borrower the one who best fits the parameters of the insurance company. As a rule, insurance for women is almost half the price.
Who is the beneficiary?
Please note that mortgage insurance for real estate differs significantly from regular insurance in terms of the beneficiary. The fact is that with regular apartment insurance, the risks are borne by the client himself (for example, the risk of unforeseen repair costs), and with mortgage insurance, the bank bears the risks. This is due to the fact that the bank has rights to the housing purchased with a mortgage until the loan is repaid. Consequently, under a mortgage insurance agreement, the bank is always the beneficiary.
Advantages of a mortgage at Alfa-Bank
Alfa-Bank offers clients various lending programs. In 2021, the bank operates lending programs for new buildings, secondary housing, as well as a mortgage program with support from the state. In addition, clients of other banks can refinance their mortgage with Alfa-Bank on more favorable terms.
The main advantages of Alfa-Bank mortgages are:
— The client can apply for a mortgage loan on the bank’s website. The entire procedure for reviewing the application and documents takes place in a convenient online format. The borrower will only have to come to the office to sign documents.
— The bank allows the client to repay the mortgage early online. This can be done in mobile banking.
— Alfa-Bank accepts for consideration an electronic version of an extract from the Pension Fund, as well as an extract of a salary account.
— The bank guarantees a preliminary decision on mortgage approval in a few minutes.
What to do if an insured event occurs?
As stated earlier, the customer does not receive a refund, but this does not mean that if leaks occur, no one will cover the cost of repairs. In fact, the scheme of interaction with the insurance company only changes slightly.
Let's consider an example with careless neighbors above who accidentally flooded you. The policy contains a telephone number to call and report an insured event. Next, the insurance company will contact the bank and resolve the case. Thus, the client is simply freed from unnecessary paperwork.
Which companies can insure your mortgage from Alfa-Bank?
When a borrower takes out a mortgage from Alfa-Bank, employees may offer to take out insurance directly from them. In some cases, managers insist on insurance from Alfa, or claim that the borrower may be denied a loan if he does not insure with them.
It is important to know that there is a list of accredited insurance companies for Alfa-Bank. From this list, the borrower can choose any insurer with favorable rates.
One of the most common companies for mortgage insurance is Ingosstrakh. But even for this company, prices differ between different services.
Cost of apartment mortgage insurance
On average, in the mortgage insurance market, coverage rates for real estate are about 0.20% of the sum insured. Thus, if the market value of an apartment is 10 million rubles, then you will need to pay 20 thousand rubles per year. contributions. Please note that for residential buildings tariffs are usually 2-3 times higher.
It is also worth noting that different companies will, of course, have different rates. In this regard, it is better to check the cost of a future policy either in online calculators or according to the regulatory documents of the insurance companies themselves (for example, VTB Insurance has publicly available tariffs).
For example, consider a calculator for calculating the cost of real estate insurance when applying for a mortgage on the Ingosstrakh website. In it you can select a credit institution, enter data about the property itself and the terms of the loan, as well as personal information. The calculator will display the cost of the policy (not in %, but in rubles), after which insurance can be purchased directly on the website.
What affects the cost of insurance
First of all, the cost of the policy is influenced by the insurance company’s tariffs and initial data. For example, when insuring collateral this is:
- the loan amount or the balance on it is the insured amount;
- year the house was built;
- materials from which walls and ceilings are built;
- presence of gas.
For life and health insurance:
- loan balance;
- gender of the borrower;
- his age;
- the presence of diseases and bad habits.
Title insurance takes into account the number of real estate transactions. The more owners of the apartment changed before the borrower purchased it, the higher the cost of the policy.
How to reduce your insurance rate?
On the one hand, you can compare tariffs in different companies and choose the lowest one. In addition, in the absence of any additional options, housing will be charged at the minimum rate.
On the other hand, it is important to remember that the mortgage is issued to the client after home insurance. Accordingly, the bank can increase the rate on the loan itself if, as a guarantee, it is provided with a policy from an insurer with which it does not have a partnership agreement. A list of bank partners is usually available on the credit institution’s website.
Accordingly, it is necessary to carefully weigh the pros and cons when choosing an insurer. It is likely that a higher price for insurance will result in lower mortgage interest and thus lower costs overall.
Documents and information for calculating and issuing a policy
To conclude an agreement with the insurer, you will need a whole package of documentation. In addition to the application from the borrower, you must submit:
- ID card (copy);
- medical examination results;
- a copy of the military ID (if the loan is issued to a military personnel);
- similar papers for co-borrowers;
- confirmation of the fact of acquisition of real estate;
- confirmation of ownership of the property;
- plan of the house where the residential property is located;
- certificate from the register of rights and registration certificate;
- extract with information about registered persons;
- account number for utility payments;
- results of the assessment examination.
The fact of purchasing a home is confirmed by a purchase agreement. Documents for insuring an apartment under a mortgage presented by the borrower (passport, inspection results, application) are needed at the stage of concluding an agreement with the insurer. The rest of the package is required after registration of square meters as property.
In addition to this list of papers, it is necessary to collect information about housing in order to calculate the cost of the policy and issue it. You must specify:
- borrower's age;
- gender of the bank client;
- health status;
- loan amount;
- type of object;
- policy issue period;
- Bank's name;
- place of registration;
- type of insurance product.
To calculate the amount of real estate insurance for a mortgage, you will have to identify the features of the property. These include the material of walls and other structural elements, location and type of housing (new building, secondary market, etc.). When determining the policy period, keep in mind that the longer the period, the lower the cost.
Recommended article: Selling an apartment with a military mortgage
Most insurers offer to carry out all calculations using a special program. It is on the website of almost every such company. To find out the cost of insuring an apartment with a mortgage using the calculator, you need to enter the data listed above in the appropriate fields, and the system will give you the approximate amount of the policy. You can find out more at the company office or by calling the hotline.
Where is it cheaper to insure an Alfa-Bank mortgage?
For example, we calculated the cost of insurance for the Ingosstrakh company. On Polis812, real estate insurance for a mortgage will cost 4,500 - 15% discount using promotional code = 3,825 rubles per year.
Life insurance will cost 7,500 – 15% = 6,375 rubles
On the Ingosstrakh website, insurance for an apartment according to the same parameters will cost 4,950 rubles. It is also worth considering that this is not the final price of the policy, since the company may offer additional risks included in the policy.
Life insurance will cost 8,250 rubles.
