Mortgage insurance is often required when a home owner borrows more than eighty percent of the value of a property. It protects mortgage companies against financial loss should a homeowner default on a loan. Even though it is for the benefit of the lender, it is commonly paid by a homeowner as a closing cost and additional recurring fee. In certain cases, a lender will absorb the cost of the mortgage insurance. This blog an overview of lender paid mortgage insurance for Newbury MA home mortgages.
An Overview Of Lender Paid Mortgage Insurance
Some mortgage companies will offer lender paid mortgage insurance loan options for a higher interest rate. When a homeowner pays mortgage insurance directly, it remains in place until the loan is paid down to around eighty percent of the purchase price or current market value. So eventually, the monthly payment reduces when mortgage insurance is no longer required. With lender paid mortgage insurance loans, this reduction in monthly payment does not happen since the higher interest rate remains in effect for the full length of the mortgage. The only way to alter it is to refinance.
Comparing Owner Paid and Lender Paid Mortgage Insurance
Although the interest rate on lender paid mortgage insurance home loans 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 annual income exceeds certain IRS limits whereas mortgage interest is normally tax deductible. Therefore, opting for an increased interest rate and lender paid mortgage insurance will also result in greater tax savings for some homeowners.
Help with Newbury MA Home Mortgages
Lender paid mortgage insurance loans can be a good option for certain types of buyers. It is important to compare it to other options and understand the immediate and long-term benefits. The above is an overview of lender paid mortgage insurance for Newbury MA home mortgages and is intended only as an introduction. To be referred to a local experienced loan officer, contact John Wells at Wellsco Realty via phone at 978-518-1481 or email email@example.com.