If you take out a mortgage for a house, you’ll likely be required to take out home insurance. Ever wonder why that is? We’ll take a closer look below. If you’re looking for assistance with home insurance and other policies in Odessa, TX, get in touch with A. L. Saland Insurance Solutions Inc. We’d be happy to answer any questions or concerns you might have.
Here’s Why Home Insurance is a Must For Many Lenders
Mortgages offer relatively low interest rates compared to personal loans and credit cards. This is because a mortgage is backed up by collateral, namely the home that is being purchased. If you fall behind on your mortgage, your home could eventually be possessed and sold to cover the rest of the loan.
For the lender, the home you buy is thus an asset, and it reduces risks. These lower risks, in turn, mean the lender can charge cheaper interest rates. However, if a home or property were to be damaged, the collateral backing the loan would be worth less. This would increase risks for the lender.
Since homes are so expensive, the risks could increase significantly if a property was destroyed outright. For this reason, the mortgage lender will require the people it lends to take out insurance on the property. In this situation, the home insurance policy protects both the homeowner and the lender.
Ultimately, this means that home insurance policies make it easier and cheaper for many people to take out mortgages. This, in turn, can help families build their financial wealth while also giving folks a place to stay.
If you need help selecting a home insurance policy, feel free to contact A. L. Saland Insurance Solutions Inc., serving Odessa, TX, and other communities.
