China Mortgage Insurance

Several domestic and foreign banks constitute the China mortgage insurance segment. Mortgage insurance compensates lenders for losses from defaulting housing loan borrowers. Another form of mortgage insurance offers borrowers an assurance that their mortgage payments will be made on time even in case of a mishap or misfortune.[br] 

Several domestic and foreign banks constitute the China mortgage insurance segment. Mortgage insurance compensates lenders for losses from defaulting housing loan borrowers. Another form of mortgage insurance offers borrowers an assurance that their mortgage payments will be made on time even in case of a mishap or misfortune.[br] 

China Mortgage Insurance: Types

Mortgage loans calls for a certain percentage of the house value to be paid up-front with the remaining value covered by loan. If the borrower wishes to keep the down payment below 20%, lenders seek some kind of guarantee against default. This reassurance is sought in the form of mortgage insurance. This type of mortgage is called Private Mortgage Insurance (PMI). This type of mortgage insurance reduces the risk for the lender while raising costs for the borrower, since the cost of insurance is included in the mortgage installments.

 

Mortgage insurance mitigates default risk and expands home ownership opportunities, allowing the lenders to reduce the capital they require to hold against low down payment mortgages. Some banks offer mortgage loans that do not require any type of insurance. However, the cost of insurance is actually included in the interest charged on the loan.

 

The second type of mortgage insurance is a Mortgage Life Insurance (MLI). MLI offers borrowers reassurance that in case of death, a mishap or disability, the mortgage will be repaid. This type of insurance is voluntary and generally provided by an affiliate of the lender.[br]

 

Players in China Mortgage Insurance

China Construction Bank (CCB) is a leading player in the China mortgage insurance segment. The bank offers its mortgage customers and the customers of other banks extensive insurance coverage to ensure that their mortgage payments are made on time even in times of misfortune. The bank also offers the customers an assurance that their family will retain the ownership of the home in event of the borrower’s death or disablement. The premium on the Mortgage Life Insurance scheme run by CCB’s affiliate QBE Hong Kong & Shanghai Insurance Ltd is based on the age of the borrower, the amount of the loan and the tenure of the loan. Apart from this several international companies such as AIG’s United Guaranty and PMI Mortgage Insurance participate in China’s mortgage insurance segment.