Oct
5
2007
What is Mortgage Insurance?
Author: Valeria WeberMortgage insurance covers the lender of the home loan rather than the home buyer, so that the lender will be assured that he will be taken care of in the event that the new homeowner defaults on the loan.
Most lenders require mortgage insurance of their borrowers, especially if the borrower offers a down payment that equals less than 20 percent of the home’s asking price. With the advent of 0 percent down loans for first time home buyers, mortgage insurance has become increasingly more popular.
How much does it cost? It varies, but it usually costs about .7 percent of the loan amount. If you borrowed $200,000 then your mortgage insurance payment will cost about $1300 a year. That’s about equal to a monthly mortgage payment.
The good news? When the new homeowners pay off the equivalent of 20 percent of their house’s buying price, most lenders will allow them to cancel the insurance.
More good news? New homeowners who purchased their mortgage insurance after January 1, 2006 and have a household income that comes to less than $100,000 annually qualify for a federal deduction that could amount to as much as $350.
October 24th, 2007 at 3:31 pm
Another form of coverage available to provide protection for your mortgage is mortgage term life insurance.
Level term life insurance taken out for 20 or 30 years may provide protection for your mortgage. Also, the coverage amount remains level throughout your mortgage term, so there are additional funds provided to help your family take care of other expenses they may incur if you were to pass away.
And, the benefiot is paid to your beneficiaries, not the mortgage loan company. Just another option to consider.