Home Mortgage Insurance
Mortgage Insurance
When you’re on the lookout for a mortgage, you have probably stumbled upon this term more than a couple of times. So what is mortgage insurance?
Mortgage Insurance – Definition
Mortgage insurance is a security product that financially insures lenders against loss should problems occur and the mortgagee defaults on a mortgage. Property mortgage insurance also provides security from loss when a lender is forced to foreclose on a property. In addition, property mortgage insurance abates or eliminates the loss to the lender when a borrower can no longer keep up with his monthly mortgage payments.
Who benefits from mortgage insurance?
Since property mortgage insurance is there to provide protection for lenders then they are naturally the first ones to benefit from property mortgage insurance. Not to be left out, homebuyers also benefit from property mortgage insurance. Property mortgage insurance allows them to buy their houses sooner. Property mortgage insurance also considerably increases the buying power of homeowners.
Mortgage insurance can reduce the amount of down payment required to be able to purchase a home. In this way, first-time homebuyers can thus afford their first home with the aid of property mortgage insurance. Also, because property mortgage insurance decreases the down payments, homebuyers can now afford to apply for a loan on a more expensive house.
Repeat homebuyers can benefit from mortgage insurance because they are required to put less money down. Property mortgage insurance helps them gain significant tax advantages. This is because property mortgage insurance is deductible interest which homebuyers can claim during tax reviews.
Another option for protecting your family from the burden of a mortgage if you die, is life insurance. An explanation of life insurance policy types and coverage conditions can be found at http://www.bluelifeinsurance.com/life_insurance_overview.html .
How do purchasers benefit from mortgage insurance?
If a purchaser does not have mortgage insurance, lenders would require them put 20% down on a home’s purchase price. Without the guaranty of property mortgage insurance, mortgagees will have to spend years saving for down payment alone. Lenders will use the large down payment as assurance, replacing the guaranty provided by property mortgage insurance.
However, with mortgage insurance, lenders will only require borrowers to pay as little as 5% or 10% down payment. For example, a debtor without property mortgage insurance saved $10,000 for the required minimum 20% down payment. This means that this mortgagee can only purchase a $50,000 home. On the other hand, if the debtor has property mortgage insurance, he will only need to make a 10% down payment for a $100,000 home with his $10,000 savings.
Who pays for mortgage insurance?
As a general rule, the people who pay for mortgage insurance are mortgagees. The initial payment for the premium of property mortgage insurance is collected at closing. Also, depending on the premium plan of the mortgage, a percentage may be taken out of your total monthly payment to cover the cost of the property mortgage insurance.
Alice Wonder
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