October 14th, 2015 9:10 AM by Jackie A. Graves, President
A new program launching early
next year will give borrowers the opportunity to protect their upfront
investment in their home, just as lenders are able to do with mortgage
Meet down payment insurance –
The new down payment insurance
program is called +Plus and is being offered by ValueInsured.
Borrowers will be able to start using the +Plus program in Jan. 2016.
Under the +Plus program,
borrowers will pay a premium to ValueInsured in exchange for having their down
payment insured against a downturn in the housing market should they decide to
sell their home.
Here’s how it works, courtesy
“+Plus works like the insurance
homebuyers are already paying for at closing, such as private mortgage
insurance, which protects the bank. But, with +Plus, the policy protects the
homebuyer: If the market falls and the homeowner decides to sell, +Plus will
reimburse them up to the full value of their down payment. The average cost for
the protection is equivalent to less than a lunch per month.”
According to a report from the Seattle Times, the premiums are expected to average
approximately $1,200 on a 10% down payment ($20,000) on a $200,000 house.
A borrower’s insurance claim
isn’t necessarily guaranteed, though. There are some stipulations.
To receive repayment of their
down payment, the sale of a borrower’s home must be at least two years after
the original purchase, but not more than seven years after the original
Additionally, the home must be
owner-occupied during the entirety of the coverage period. Borrowers are not
allowed to rent out their homes.
Also, the sale must be to an
unrelated third party and no leasebacks are allowed.
Borrowers will have their claim
paid if the sale price of their house is lower than the original purchase
price, and the Federal Housing Finance Administration Home Price Index for the borrower’s home states that at
the time of sale it is lower than it was on the date they purchased the home.
In that instance, a borrower’s
payout will be the lesser of their down payment (up to 20% of the home’s
purchase price), the actual equity lost on the sale, or the purchase prices of
the home multiplied by the reduction in the state’s FHFA HPI.
“When the down payment is
protected, the modern American homebuyer experiences more control, confidence
and flexibility, even in a volatile real estate market,” said Joseph Melendez,
founder and CEO of ValueInsured.
“Our down-payment protection
program is backed by one of the world’s largest re-insurance companies, with
over $8 billion in capital,” Melendez added. “So consumers can count on us to
be there if and when they need to get their money back when they sell their
Below is an example, courtesy
of ValueInsured, of how the program would work:
For example a borrower buys a
home for $100,000 and puts 20% (or $20,000) down. In five years, the borrower
decides to sell. The table below shows how the payout would depend on the sale
price and the change in the HPI.
As the table shows, the
borrower would receive:
No payout if the borrower sells
at or above the price paid for the home, or if the HPI for their state has not
decreased. These two scenarios are shown with white shading in the table.
A payout of less than the down
payment if either the sale price or the HPI fell only slightly. Those scenarios
appear in light green shading.
A full refund of the down
payment if the sale price and the HPI fell by at least 20%. Those scenarios
appear in darker green shading.
“The Millennial mindset has
created today’s modern homebuyer,” said Cleve Bellar, chief marketing officer
“They have created a new set of
home-buying expectations. They demand clear and simple services, terms that are
fair and tools that give them control over their buying options,” Bellar said.
“The Millennial mindset is not defined by age or demographics. It’s a group
with common sense, savvy, the desire to control their own destiny and,
ultimately, the need to protect their hard-earned savings.”
By Ben Lane –
To view the original article click here