What is private mortgage insurance?
Private mortgage insurance is a valuable insurance tool that can help you buy a house with a low down payment - less than 20 percent. If for any reason you stop making house payments, mortgage insurance protects your lender from financial loss. Because lenders have this protection, they are able to offer more mortgage loans with lower down payments.
How is mortgage insurance different from other types of home insurance?
You're probably familiar with homeowner's insurance, which protects homeowners against theft or damage to their house and contents. Similarly, hazard insurance is designed to compensate a homeowner for any losses that occur due to specified hazards, such as fire or flooding. Mortgage life insurance provides financial protection in case of the homeowner's death.
But mortgage insurance pays a lender for part of their financial losses when a borrower fails to repay the loan. Mortgage insurance makes it possible to buy a home with a low down payment or, in some cases, no down payment.
Why do I need mortgage insurance?
Unfortunately, future circumstances are unpredictable, and loan defaults sometimes occur unexpectedly. Because lenders can lose a great deal of money on an unpaid mortgage, mortgage insurance is generally required for all loans with less than a 20 percent down payment, even if the borrower has a good credit rating.
How much does mortgage insurance cost?
Private mortgage insurance amounts to only a small fraction of your total housing cost, for example about 7/10 of 1 percent of the loan amount per year. The amount of mortgage insurance coverage required varies by lender and by loan type. Contact your lender for a specific price quote based on the details of your loan.
How are premiums paid?
Borrowers usually pay premiums to their lenders as part of their monthly mortgage loan payment. Often the first premium is paid when the mortgage loan closes, and thereafter the premium may be a small part of the monthly mortgage payment. We offer a variety of mortgage insurance premium payment plans that are designed for maximum affordability and convenience.
What types of mortgage loans are covered?
Our standard plan covers virtually all of the popular mortgages available today:
- 15- or 30-year mortgages
- First purchases
- Fixed rate loans
- Adjustable rate loans
- Refinances
If you're not sure whether a particular mortgage type is eligible for standard coverage, just ask your lender.
Is mortgage insurance tax deductible?
If your family earns $109,000 or less a year, new legislation allows you to deduct the cost of the MI premium
1 on your federal tax return.
Can mortgage insurance be cancelled?
Mortgage insurance often can be cancelled when loan-to-value requirements and other lender guidelines are met. Check with your lender regarding requirements.
2 Can I choose the mortgage insurer?
Yes. You can tell your lender if you have a preference for your mortgage insurance provider.
