Insurance Plan Allows Homeowners To Guard Against Down-Payment Losses

By: Kenneth R. Harney (Washington Post) October 2015

When you put down thousands of dollars to purchase a home, you’re taking a potentially serious financial risk: You could lose some or all of that money if the value of the house declines or a job transfer, illness or other life event forces you to sell the property during a dip in market demand.

But would you be willing to pay an insurer a one-time premium to protect your down payment against loss? There’s never been such an option, but beginning in January that’s likely to change with the projected nationwide rollout of something called “+Plus by ValueInsured.”

The basic idea is straightforward: For an upfront premium that under some circumstances could be part of the interest rate you pay on your mortgage, your down payment — all the way up to $200,000 — would be insured, with you as the beneficiary. If the value of your house declines and you sell at a loss, you’d be eligible to make a claim for up to the full amount of your original down payment.

The premiums are expected to average around $1,200 on a $20,000 down payment on a $200,000 house. If you purchase the coverage as part of a lender credit toward closing expenses, rather than paying cash for the coverage at closing, the +Plus premium could be rolled into the interest rate on the entire loan, raising the rate slightly. It could also be a supplement to lender-paid mortgage insurance, with a higher rate on your mortgage.

Sounds intriguing, right? But as with all insurance products, you’ve got to look hard at the details, especially the terms governing when and how much you’ll receive if you make a claim for a loss.

Continue full story,Washington Post.