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Mortgage Protection Plan: Homeowners' Best Friend
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Dec 2, 2007, 22:18

(NAPSI)-Since a home is likely the largest asset most people ever own, it makes sense to protect that asset just in case circumstances make it harder to meet mortgage payments.

If job loss, illness or injury disrupts household finances, the monetary burden can unexpectedly shift to one spouse or partner so that family income is inadequate for meeting household expenses.

The answer may rest with an increasingly popular protection plan that kicks in to cancel up to 12 months of mortgage payments for customers of some banks. The one-year reprieve is often enough time to give customers time to recover from their situation or get back on their financial feet. The name for this protection: Borrowers Protection Plan.

According to experts, interest in this protection spikes during times of economic uncertainty.

Keyanta Dargan at Bank of America estimates that roughly 15 percent of her company's mortgage customers opt for the protection when they get their mortgage, but that total is on the rise.

"They keep it in their hip pocket if the unforeseen arises," says Dargan. "Hopefully it won't, but we're here if they need us."

Not Mortgage Insurance

Borrowers protection is not mortgage insurance. Private mortgage insurance (PMI) protects the lender and does not step in to make missed payments.

This borrowers protection cancels the amount of the mortgage, including both principal and interest, but does not pay for property taxes, homeowners insurance or HOA dues. The protection works for most types of income interruption, including involuntary unemployment, disability or hospitalization.

Many mortgage holders pay nothing for the first year of this protection as a benefit to get their home loan. After the first year, the average payments are roughly $45 to $50 per month, depending on the amount of the monthly principal and interest payments.

Still, customers consider the protection a good deal. Many homeowners who own it appreciate the peace of mind it brings if they have an interruption of income, and the protection gives them time to regroup and get back on their financial feet.

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