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Mortgage protection insurance protects your lender from financial loss

What is mortgage insurance?

Mortgage protection insurance is a valuable insurance tool that can help you buy a house with a low down payment – less than 20 percent. If for any reason you stop making house payments, mortgage insurance protects your lender from financial loss. Because lenders have this protection, they are able to offer more mortgage loans with lower down payments.

mortgage protection

How is mortgage insurance different from other types of home insurance?

You’re probably familiar with homeowner’s insurance, which protects homeowners against theft or damage to their house and contents. Similarly, hazard insurance is designed to compensate a homeowner for any losses that occur due to specified hazards, such as fire or flooding. Mortgage life insurance provides financial protection in case of the homeowner’s death.
But mortgage insurance pays a lender for part of their financial losses when a borrower fails to repay the loan. Mortgage insurance makes it possible to buy a home with a low down payment or, in some cases, no down payment.

Why do I need mortgage insurance?

Unfortunately, future circumstances are unpredictable, and loan defaults sometimes occur unexpectedly. Because lenders can lose a great deal of money on an unpaid mortgage, mortgage insurance is generally required for all loans with less than a 20 percent down payment, even if the borrower has a good credit rating.

How much does mortgage insurance cost?

Private mortgage insurance amounts to only a small fraction of your total housing cost, for example about 7/10 of 1 percent of the loan amount per year. The amount of mortgage insurance coverage required varies by lender and by loan type. Contact your lender for a specific price quote based on the details of your loan.

How are premiums paid?

Borrowers usually pay premiums to their lenders as part of their monthly mortgage loan payment. Often the first premium is paid when the mortgage loan closes, and thereafter the premium may be a small part of the monthly mortgage payment. We offer a variety of mortgage insurance premium payment plans that are designed for maximum affordability and convenience.

What types of mortgage loans are covered?

Standard plan covers virtually all of the popular mortgages available today:

• 15- or 30-year mortgages
• First purchases
• Fixed rate loans
• Adjustable rate loans
• Refinances

If you’re not sure whether a particular mortgage type is eligible for standard coverage, just ask your lender.

Can I choose the mortgage insurer?

Yes. You can tell your lender if you have a preference for your mortgage insurance provider.

Benefits Of Mortgage Protection

A loan with mortgage insurance may be the safest and most affordable option to help your family achieve the dream of home ownership. Mortgage insurance can help new home buyers get into a home sooner, with a competitive monthly payment. Existing homeowners with adjustable rate mortgages can refinance to a new loan with mortgage insurance to avoid rising payments. A loan with mortgage insurance has these advantages:

Competitive Monthly Payments

In today’s environment, loans with mortgage insurance can compete with or even beat payments offered by combination loans. In a few short years, monthly mortgage insurance can be canceled, reducing payments even further, while a second loan must be paid in full.

Predictability

Expect steady monthly payments that never increase. With other financing options, such as combo or “piggyback” loans, monthly costs go up when interest rates rise.

Tax Deductibility

Mortgage insurance premiums are tax deductible for many borrowers. By taking the deduction on your federal income taxes, you can put a little more in your pocket each year.

The Unparalleled Ability to Cancel

Because mortgage insurance is temporary insurance, you may be able to cancel it after building sufficient equity in your home. With today’s home appreciation rates, this can occur in as few as two to four years, even with a low down payment.

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