Types of Mortgage Insurance Programs

What types of Mortgage Insurance programs are out there?

Each homebuyer is unique, and purchasing mortgage insurance is no longer a cookie-cutter, one-size-fits all industry. From buyers that are cash-strapped to those looking to trade up, there are several mortgage insurance programs to consider.

• The Finance Single Premium Option—With this option, you pay the insurance during the closing with one payment. Simply put, you’re financing some of the mortgage insurance with the loan amount. Therefore, the single premium mortgage insurance stays with the loan until it is paid in full, since it has become part of the loan. Nonetheless, some homebuyers see this option as a plus because it gives tax benefits and could lead to lower monthly payments. The premium is also refunded if you get no longer need the mortgage insurance or sell the house.

• Lender Paid Mortgage Insurance–In this option, (sometimes called the "no mortgage insurance" option), the lender pays the mortgage insurance premium for the borrower. The lender then charges the borrower a slightly higher interest rate. This option is not available on all loans, but has several advantages to those who qualify. You do not have to pay a monthly premium, enjoy tax benefits, and have the potential to qualify for a bigger loan.

• Monthly Mortgage Insurance—Also called "MI" or "MMI," this option allows the borrower to pay a fee every month, regardless of the down payment amount. Borrowers will be locked into paying MI’s for at least five years. However, the mortgage payments decrease by the premium amount once borrowers are in the position to cancel their MI’s. Some insurance companies are now making MI’s 100% tax-deductible for homebuyers with adjusted gross incomes of as much as $100,000.

. . . to be continued.

No Comments