With the recent
housing crisis, mortgage insurances has seen a change. For those
that don't know what mortgage insurance is, let's go over the main function of mortgage insurance and how it
affects those that have a home mortgage.
to make it easier to understand, let's first think about the insurance payments that all of us make in our
lives. One of the most common insurances that we pay is that of car
insurance. This ensures that our vehicles will be fixed up and
repaired in the event there is an accident. Mortgage insurance is
designed to cover the lender if the borrower decides to default on the loan, or stops paying. Since mortgage loans are typically for hundreds of thousands of dollars, a
default on a loan can be very costly to a lender. In order to
protect themselves against default and loss, mortgage lenders charge mortgage insurance to private companies in
order to protect the money that they are lending to borrowers.
Now that we understand what
mortgage insurance is, the question now is how does it affect a borrower?
the banks don't want to have to pay the insurance fees, they pass on these payments to the borrower. This means
that the borrower will pay a certain amount each month that goes just to mortgage insurance as part of their
loan repayment. The tricky thing here is that many different lenders charge different mortgage insurance rates,
so it becomes imperative that you do your research and find the lenders that have a lower insurance
borrower, there are some things that can lower your mortgage insurance. One such technique is to have a high
credit rating and to have money to put down on a bad credit mortgage, or mortgage refinance. In the
instance of mortgage refinancing, most mortgage insurance can be eliminated
if the house apprises for more than what the loan amount currently is. With the economy having tanked in the
past few years, the appraisal values for homes have dropped significantly. This means that having assets, or
money to put down is the best idea when it comes to getting a home loan without high mortgage insurance
can see, mortgage insurance is necessary to protect the lender, but as a borrower, you can position yourself to
pay lower mortgage insurance rates, or eliminate mortgage insurance altogether. Make sure to do your research on the different lenders that you are
considering as you will want to pick a lender with a low rate of mortgage insurance.