HOMEBUYERS OFFERED DOWN PAYMENT PROTECTION PLAN
- myrealtornews
- May 10, 2016
- 2 min read
Amalgamated Bank based in New York recently announced the offering of a new product developed by ValueInsured of Texas. The product, a down payment protection plan called “+Plus”, is designed to protect a homebuyer’s down payment from decreasing market values for 7 years from the time they purchased their home.
According to ValueInsured, the product is not to be confused with mortgage insurance, which protects the bank. +Plus allows homebuyers to insure up to 20% of the home’s value at the time of purchase to a maximum insured amount of $200,000.
CNBC gave an example below of how the insurance works:
“Say you put 10 percent down on a $200,000 home. Your down payment is $20,000. You pay ValueInsured a one-time premium of about $1,200. You are now insured for seven years. Three years in, your job transfers you, and you have to sell, but the value of your home has dropped. ValueInsured pays you the amount of home equity lost, up to the full $20,000 down payment.”
The product is designed to help homebuyers purchase more confidently and allow them to participate in the real estate market with one less fear standing in the way of their dream house.
The ‘not-so-good-news’? At the time of a claim being submitted, ValueInsured establishes the home’s value according to a government index, which in turn measures by state and not by zip code, neighborhood, or by the house itself. The actual amount repaid might not be the full down payment because ValueInsured would pay an amount equal to the lesser of the actual loss in sales price, loss in the state home price index as measured by the Housing Finance Agency, or the insured down payment. A homeowner whose property is located in an area of high volatility may suffer by a state-wide index that doesn’t reflect the same shifts in value.
However, as potential homebuyers remember the seismic shifts of 2008-09, when 26% of homes nation-wide were underwater, this added insurance may be welcomed.
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