Home Mortgage Insurance
Lenders are insured about borrowers in case they decide to default on their home mortgage. If a borrower defaults, and then the lending company takes the title to the house or property, the mortgage insurance would lessen the loss of the lending company. As an effect, the home mortgage insurer shares the burden and the risk of the lender. Here is important information about home mortgage insurance that you can use when you are handling your home mortgage:
- Home mortgage insurance has a lot of benefits for a home buyer, not just for the lender. Through the home mortgage insurance, home buyers, even first time ones, can have low down payment that would let them purchase their first house.
- Without home mortgage insurance, your lender would typically require you to pay 20 percent of the home’s price. This can be too heavy for you. If you have home mortgage insurance, your lender can allow 5 to 10 percent of home mortgage.
- As a borrower, you would be the one to pay for your home mortgage insurance. Initially, a premium is collected. This depends on the premium plan that is chosen by the borrower. There are different plans for borrowers, giving them flexibility in choosing their home mortgage insurance:
- Annual plan. With an annual plan, the borrower has to pay the first-year premium during closing. Also, as part of the house payment made every month, an annual renewal premium is also collected.
- Monthly premium. With this type of home insurance plan, the cost is a little higher than the traditional home mortgage insurance. However, these types of premiums significantly reduce home mortgage insurance closing costs.
- Singles. With this type of home insurance mortgage, you just have to pay for a single premium at one time, instead of paying an initial premium and other renewal premiums. Because single premium home mortgage insurances are normally financed as part of the home mortgage loan, you do not need to pay in cash for your home mortgage insurance during closing.
- All of these plans offer both refundable and nonrefundable premiums. With a refundable premium, you can receive your money back on unused part if your home mortgage insurance is stopped before your home mortgage loan is fully paid. On the other hand, a nonrefundable premium is a little less than a refundable one. This gives you savings. In the event that you decide to stop the home mortgage insurance, you would not have a chance to refund your money.
