October 8th, 2012
With foreclosures still higher than usual, some may think mortgage insurance is a good idea for protecting their very big investment.
Some types of mortgages require insurance, while others do not. If you put less than 20 percent down on your mortgage, you may be required to pay a monthly insurance premium.
If insurance is required, the lender will either have you pay the premium up front, or give you a higher rate in exchange for paying your premium monthly.
An important thing that McHood notes is that once you reach the 20 percent equity, you are often able to then drop the insurance all together. Your lender of course won’t call and tell you this, so you will need to be proactive and reach out to them once you think you’ve paid enough.
On a last note, McHood says,
“It behooves you to ask your loan officer lots of questions related to mortgage insurance. It’s very common for a lender to offer a program with a different option for PMI, and asking questions can be an easy way to save money.”