Mortgage insurance (MI) is a policy required by lenders to cover their losses if a property owner defaults on their mortgage. When the mortgage provider goes to relinquish a home, they are unlikely to regain the total amount owed on the mortgage. MI applies to first mortgages where the home owners are financing more than 80% of the purchase price of the home. There is normally an up-front MI fee due at closing and recurring fees based on a percentage of the amount of the loan. NJ financing MI definition and recommendations on getting rid of MI are provided below.
Amount of MI
MI rates depend on the type of loan. Home buyers should get a quote from a mortgage professional to get sample calculations and evaluate the impact that it will have on anticipated mortgage payments. Rates can also change at certain times, so be sure to get accurate figures when you are evaluating your ability to purchase a home. Once you close on a loan, the MI rate for that specific mortgage will never change for the life of that mortgage. With certain mortgages, such as FHA, you may be able to obtain a refund of a portion of the up-front MI charged at closing if you refinance within a certain period of time.
Recommendations on Getting Rid Of MI
Recurring MI charges will normally disappear when the mortgage is paid down to 80% of the beginning purchase price. Most mortgage companies allow removal of MI a few percentages earlier if requested by the homeowner when that percentage mark is reached. Refer to your mortgage paperwork for the percentages that apply to your loan. In an increasing real estate market, homeowners can also order a new appraisal (from a third-party approved by the lender) to illustrate that the value of the home has improved and that you may have therefore reached the 80% mark sooner.
NJ Financing MI Definition and Help
Most home buyers are unable to provide a 20% down payment and subsequently cannot avoid MI. By understanding how MI works and how to get rid of it, home buyers can realize significant savings. We hope that you found this NJ financing MI definition useful and will be able to use the recommendations on getting rid of MI. For additional information on this and other related topics, contact Pedro Teixeira at FIT Credit by calling 215-613-8130 or emailing pteixeira.fit@gmail.com.