Mortgage insurance is often mandated when a home buyer borrows more than eighty percent of the value of a property. It protects mortgage companies against loss when a homeowner default on. Even though it insures the lender, it is normally billed to the buyer as a closing cost and additional monthly premium. In some cases, a mortgage company will cover the cost of the mortgage insurance. This blog provides an overview of lender paid mortgage insurance for MA home mortgages.
An Overview Of Lender Paid Mortgage Insurance
Some mortgage companies will provide lender paid mortgage insurance loan alternatives in exchange for a higher interest rate. When a homeowner pays mortgage insurance themselves, it remains in place until the balance is paid down to around eighty percent of the original price or current appraised value. So eventually, the monthly payment is lowered when mortgage insurance is no longer applicable. With lender paid mortgage insurance loans, this reduction in monthly payment does not occur since the higher interest rate applies to the life of the mortgage. The only way to change it is to refinance.
Owner Paid versus Lender Paid Mortgage Insurance
Although the interest rate on lender paid mortgage insurance loan programs may be greater, it may still lead to a lower monthly payment for certain buyers. Additionally, mortgage insurance may not be tax deductible for buyers whose earnings is higher than certain IRS guidelines whereas mortgage interest is generally tax deductible. Therefore, opting for an increased interest rate and lender paid mortgage insurance may also result in better tax advantages for some homeowners.
Assistance with MA Home Mortgages
Lender paid mortgage insurance loans can be a better solution for some buyers. It is important to compare it to other types of mortgages and understand the short term and long-term benefits. The above is an overview of lender paid mortgage insurance for MA home mortgages and is intended only as an introduction. For a list of experienced local loan officers, contact John Wells at Wellsco Realty via phone at 978-518-1481 or email email@example.com.