A new type of insurance is expected to roll out early next year that will allow borrowers to protect the thousands of dollars they put down in purchasing a home.
Beginning next January, +Plus by ValueInsured will charge an upfront premium that will mostly be tied into the interest rate borrowers pay on their mortgage and then insure the borrower’s down payment all the way up to $200,000. The borrower will be the beneficiary.
For borrowers who see a dip in the value of their home and have to sell at a loss, they would be eligible with the insurance to make a claim up to the full amount of their original down payment. The premiums on the insurance are projected to average around $1,200 on a $20,000, 10 percent down payment on a $200,000 house.
The idea is to offer borrowers more protection with their down payment in case of housing market declines or a job transfer, illness, or life event that forces them to sell during a sluggish housing market.
The goal +Plus is “to take the risk element off the table and give [buyers] more confidence,” says Joe Melendez, founder and CEO ofValueInsured, a Dallas-based company.
The idea has intrigued some in the industry, but they caution it’s important borrowers read the fine details, particularly the terms on when and how much they’ll receive if they make a claim for a loss. Under the program, borrowers won’t be able to file a claim during the first two years after their purchase or after seven years. What’s more, the +Plus plan will judge its payouts in part by a property value index published by the Federal Housing Finance Agency -- so if a borrowers’ state index hasn’t declined as much as their home’s value since the date of purchase, they aren’t likely to get any money back.
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