Buyers Offered Down Payment Insurance

April 14, 2016

An insurance company wants to help home buyers purchase more confidently, without the fears of a housing bubble looming over their investment. To soothe these fears, ValueInsured has launched a first-of-its kind down payment protection plan. Company officials are touting its new protection plan +Plus as insurance for home equity.

"Our product gives today's home buyers control, gives them flexibility in how they consume the real estate they want to own," says Joseph Melendez, CEO of ValueInsured. "Do you want someone's life savings to be at risk if they have to move through no fault of their own?"

CNBC offers up the following example 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.

"+Plus allows you to insure up to 20 percent of your home's value at the time of purchase to a maximum insured amount of $200,000. That could be 10 percent on a $2 million home. The term is seven years, and the home must be owner-occupied, so no rental properties. The premium varies depending on the amount insured and on the state of residence.”

Sound too good to be true?

One possible caveat, according to industry insiders: ValueInsured measures a home’s value according to a government index, which measures by state and not by house. As such, when home owners file a claim, ValueInsured will pay an amount equal to the lesser of the actual loss in sales price. That is, the loss in the state home price index measured by the Federal Housing Finance Agency or the insured down payment.

Nevertheless, Melendez believes the insurance will have a strong pull with home buyers in the market.

"People are telling us that if they have access to this product, they're more likely to buy a home," he says.

Source: “Down Payment Insurance Seeks to Ease Housing Bubble Fears,” CNBC (April 13, 2016)