It is every American’s dream to own a home. However, making this dream a reality is not as easy as it seems. The mortgage payments are very high and it takes more than one income to meet all the monthly expenses including mortgage. This makes it very hard to meet the criteria to be eligible for a mortgage. This is how mortgage insurance helps them. Today, in the USA there are many online mortgage service providers helping home buyers turn their dreams into reality.
What is a Mortgage Insurance?
A mortgage insurance is an insurance policy that pays the lender the mortgage amount in case of any default or unforeseen event to the borrower. It protects the lender as he will get back the money lent out. It also protects the borrower as their family member is saved from any financial burden in case anything happens to the borrower.
Usually, mortgage insurance costs between 0.25% to 2% of the borrower’s loan balance per year. This means the higher the loan amount, the higher your mortgage insurance will be. Now many online mortgage service companies have come which can help you get mortgage insurance quotes online or even get the policy online.
Why Do We Need A Mortgage Insurance?
Getting a mortgage insurance is not mandatory in many cases. When you are looking to get a mortgage, you are required to pay a down payment of 20% of the property amount. Only then you can get a mortgage loan of 80% for the house you are willing to buy. This can be very difficult for many home buyers.
In the US, it could take more than 20 years for a firefighter or a school teacher to save that 20% down payment required for buying a home. However, if the borrower goes for a mortgage insurance, he or she can get the loan without paying the 20% down payment. This allows people will lower incomes to buy their own house.
Advantages of a Mortgage Insurance
A mortgage insurance is not only beneficial to the lender, but provides advantages to the borrower as well. Here are some advantages of taking a mortgage insurance:
- Allows access to mortgages as people who do not have the ability to pay the down payment of 20% can also get loans and get their dream home.
- It offers tax benefits to the borrower. Mortgage insurance allows taxpayers to deduct premiums from federal income tax.
- You can cancel the Mortgage premiums once you have reached 80% of your home equity.
- Many mortgage service companies offer added benefits to borrowers like premium refunds, online quotes and many more.
To Sum Up
Everyone wants to live the American dream but this comes with a cost. A mortgage insurance is just a means of owning a home sooner rather than later as you don’t need to save for the 20% down payment required for a mortgage loan. You should plan your finances before even considering getting a mortgage service as it is a big step and involves a lot of money. Sometimes, it is better to take it slow and wait for the good things to arrive.