Mortgage insurance is generally included in a loan when a home buyer puts less than twenty percent down of the value of a home. It protects mortgage companies against financial loss should a homeowner fail to pay. Although it insures the lender, it is commonly the responsibility of the buyer as a closing cost and additional recurring amount. In certain cases, a lender will cover the expense of the mortgage insurance. This article important information on lender paid mortgage insurance for MA home loans.
Important Information On Lender Paid Mortgage Insurance
Some lenders will provide lender paid mortgage insurance loan programs in exchange for a higher interest rate. When a homeowner pays mortgage insurance directly, it stays in effect while the loan amount exceeds eighty percent of the original price or current market value. So at some point, the monthly payment decreases when mortgage insurance is no longer applicable. With lender paid mortgage insurance loans, this reduction in monthly payment will not occur since the higher interest rate continues for the life of the loan. The only means to alter it is to refinance.
Choosing Between Owner Paid and Lender Paid Mortgage Insurance
Even though the interest rate on lender paid mortgage insurance loans may be greater, it can still lead to a lower monthly payment for some buyers. Additionally, mortgage insurance may not be tax deductible for buyers whose annual income is higher than certain IRS guidelines whereas interest paid on a loan is normally tax deductible. Therefore, opting for an increased interest rate and lender paid mortgage insurance might also result in better tax savings for some homeowners.
Help with MA Home Loans
Lender paid mortgage insurance loans can be a good option for some buyers. It is important to analyze the advantages and understand the immediate and long-term benefits. The above is important information on lender paid mortgage insurance for MA home loans and is intended only as an introduction.