Mortgage Insurance Simple Answers
What is Mortgage Insurance?
Mortgage Insurance helps borrowers realize the dream of homeownership sooner by enabling them to purchase a home with less than a 20% down payment. Mortgage insurance provides financial protection for lenders and investors if a homebuyer defaults on a mortgage loan. With this protection, lenders can offer more low-down-payment mortgages to homebuyers.
What are the Benefits of MI?
Mortgage insurance can help a homebuyer qualify for a home with a lower down payment, buy the home sooner, stop paying rent faster, and claim more tax-deductions. Of course, buying a home sooner accelerates building equity and longer-term benefits of homeownership. Even if the homebuyer can make a 20% or more down payment, using mortgage insurance to put less money down potentially makes money available for investments, home improvements or education.
Visit the Benefits of Mortgage Insurance section to discover numerous reasons why MI might be right for today's homebuyers.
Are Loans with Mortgage Insurance Safe?
Yes. Premiums on mortgage insurance are fixed and do not increase if interest rates rise. A 30-year fixed rate mortgage with MI is a safer alternative to other riskier loan types.
Is MI Tax Deductible?
Yes. At a time when homeowners need relief most, Congress renewed legislation on the tax deductibility of mortgage insurance. For eligible borrowers within certain income limitations, the tax deduction has been extended through 2010.
Click here for a page that describes tax deductible MI even further.
Does Mortgage Insurance Offer Assistance to Struggling Borrowers?
Yes. For families struggling with financial difficulties, mortgage insurance can help preserve the dream of homeownership. Homeowner assistance programs are a built-in feature of mortgage insurance focused on helping families avoid foreclosure and, when possible, keeping them in their homes.
Visit the Homeowner Assistance page to learn more about the program, borrower workouts and training opportunities.
Is it Smarter to Choose a Loan with MI over a Combo Loan?
A combination loan, or "piggyback," stacks a higher rate second loan on top of the first loan creating two loans and two payments. In recent years, it became popular for homebuyers with less than a 20% down payment. However, resetting interest rates, slowing home sales and declining home prices, such as in today's financial environment, can leave families with higher mortgage payments, little-to-no equity, and no protection from foreclosure.
Instead, borrowers find the safety and security of an MI loan much more appealing. Mortgage insurance not only helps people get into a home sooner, it offers payment predictability throughout the life of the loan and several programs to help families maintain homeownership should a financial hardship occur. Plus, mortgage insurance keeps the window of opportunity open for a second mortgage, if desired, in the future.
