Mortgage insurance is generally required when a home owner puts less than twenty percent down of the value of a home. It protects mortgage companies against loss should a homeowner fail to pay a loan. Even though it protects the mortgage company, it is normally paid by the homeowner as an up-front fee and additional recurring premium. In some cases, a mortgage company will cover the cost of the mortgage insurance. This blog an overview of lender paid mortgage insurance for PA loans.
An Overview Of Lender Paid Mortgage Insurance
Some lenders will offer lender paid mortgage insurance loan options in exchange for an increased interest rate. When a buyer pays mortgage insurance themselves, it stays in place until the balance is paid down to around eighty percent of the original price or current appraised value. So at some point, the monthly payment reduces when mortgage insurance is no longer required. With lender paid mortgage insurance loans, this drop in monthly payment does not occur since the higher interest rate applies to the full length of the loan. The only means to change it is to refinance.
Comparing Owner Paid and Lender Paid Mortgage Insurance
Even though the interest rate on lender paid mortgage insurance mortgages may be greater, it might still result in a lower monthly payment for certain buyers. Furthermore, mortgage insurance may not be tax deductible for buyers whose earnings exceeds certain IRS guidelines whereas mortgage interest is normally tax deductible. Therefore, opting for a higher interest rate and lender paid mortgage insurance may also result in better tax savings for some buyers.
Assistance with PA Loans
Lender paid mortgage insurance loans may be a good option for certain types of buyers. It is important to analyze the advantages and understand the immediate and long-term differences. The above is an overview of lender paid mortgage insurance for PA loans and is provided only as an introduction.