This week I would like to discuss mortgage insurance basics. Mortgage insurance is an insurance policy which compensates lenders for losses due to the default of a mortgage loan. A borrower is required to have mortgage insurance on a home purchase when they put less than 20% down. Mortgage insurance can be either public or private depending on the type of loan. There is also (LPMI) Lender paid private mortgage insurance, where the insurance premium is paid by the lender, who in turn charges the customer a slightly higher interest rate.
Mortgage insurance allows people to buy houses with down payments as low as 3%, and the monthly payment is tax deductible. The US Homeowners Protection Act of 1998 requires PMI to be cancelled when the amount owed reaches a certain level, particularly when the loan balance is 78 percent of the home’s purchase price.
For further information contact:
Steve Madonna
Weichert Financial Services
610-566-2045
