The feelings associated with the purchase of your first home are priceless. You might as well have spent countless days thinking about ways in which the times have changed. The last few years of your life might have been spent in finding house for rent in Vijayawada—one after the other but not anymore. Today, you are standing at the threshold of a new beginning in your life. Purchasing that dream house of your own is something which you are looking forward to. You have worked your way up there. You have earned yourself a chance to fulfill a dream which many cannot. Naturally, the thrill associated with the venture (of buying a house) is unassailable. However, it will not really be prudent to forget about all your financial responsibilities in all this excitement.
Purchasing a home is synonymous with taking out a mortgage. So, there obviously is a major financial responsibility lying squarely on your shoulders. There are many aspects of mortgage which you need to educate yourself about. Today, however, we will be discussing about mortgage insurance—one of the crucial aspects of mortgage. Go through the post in a bid to find out more.
Mortgage Insurance: Few Basic Aspects Explained
Mortgage companies rely on mortgage insurance (alternately known as Lender’s Mortgage Insurance or Private Mortgage Insurance) in order to protect themselves in case a borrower fails to repay the loan. The mortgage companies purchase the insurance policies and these premiums are added on to the monthly payments of borrowers. There are mortgage calculators to help you determine the period of time for which you will have to pay the premiums. The borrower obviously doesn’t have to pay for the insurance cover for the entire tenure of his loan. If the borrower is not comfortable paying the insurance premiums on the monthly basis, he might as well request for a yearly or single term basis of payments.
It is the lender who gets to choose the mortgage company while the borrower is obliged to pay it. Here lies the controversy against this whole concept of mortgage insurance. However, if you are ready to pay for the mortgage insurance cover it gets easier for you to buy the house sooner. It definitely goes to increase the cost of your house as well!
When you need to pay for mortgage insurance and when you don’t
You should be ready to pay for mortgage insurance if you are taking out a mortgage which is more than 80% of the total value of the property. Conversely, if you are paying down 20% of the total home loan availed by you then you might not even be required paying for the insurance cover.
At times, your lender might as well let go the mortgage insurance premiums if you are ready to pay higher rates of interest on the loan. The right thing to do here would be to refrain from making any hasty decision. Choosing between the high interest rates and insurance premium might always turn out to be tricky situation. There are special mortgage calculators to help you with this. With the help of these calculators, you can actually determine whether you will be paying up more for the insurance premiums or when you are paying higher rates of interest. So, educate yourself more about this particular aspect.
The whole point of discussing mortgage insurance is to let you know that such a concept exists and when you finally go on to settle for the mortgage you will have to decide whether you want to pay up higher rates or the insurance premiums.