A bouncing baby is obviously a joyful occasion. Yet, when the new precious bundle needs a nursery and you don’t have adequate room in your existing residence, it may be the perfect time to contemplate investing in a new home with plenty of space for your growing family. Having said that, if you’re like the rest of the countless Americans who are planning on purchasing a house, but are on a limited budget and don’t have enough money for a substantial down payment, you’re probably going to need private mortgage insurance (PMI).
Precisely what is PMI?
When many people consider insurance for their home they immediately think of homeowners insurance or hazard insurance, which is property insurance and protects against losses in the instance of a catastrophe. Or they think of mortgage life insurance coverage, which takes care of your mortgage loan in the event you become disabled or die. Private mortgage insurance is a completely different type of insurance coverage. PMI protects the mortgage lender if the homeowner for whatever reason cannot repay the loan and defaults. Fundamentally, it allows the lending company to recover some of its costs and losses after foreclosing and selling a repossessed home.
Private mortgage insurance can help you get into your brand new home faster and depending upon your financial circumstances a substantially smarter, as well as more secure option. Commonly, loan providers want purchasers to put as much as 20% down when buying a house. With a new infant and extra expenses you may be unable to place such a large amount down without the need of depleting all of your funds. Not forgetting, you are likely to want a little bit of cash on hand so that you can purchase some new furniture to fill up your brand-new beautiful home. Mortgage insurance can help you purchase a home with a lower down payment – -possibly as little as 3% down.
Additionally, there are advantages to having mortgage insurance other than just getting you into your home with a more affordable down payment. Genworth, a Fortune 500 global financial security company, offers 5 good reasons mortgage insurance is a wise choice.
1. It’s affordable. A single loan with mortgage insurance is often cheaper than taking out two loans., and it’s competitive with other alternatives, like FHA loans.
2. It’s flexible. Mortgage Insurance premiums can be paid monthly along with your mortgage payment, or upfront in a lump sum. Ask your lender about your options.
3. It’s Tax Deductible. MI premiums are tax deductible for many homeowners through December 31, 2011. With this tax deduction you may be able to save $200-$400 each year. MI tax deductibility is currently unavailable for MI premiums paid on or after January 1, 2012. While the legislation is expected to be renewed in early 2012, it may not be. Check with your tax advisor for full details.
4. It ends – May be canceled when you’ve built 20% equity and maintained a good payment record. According to Mortgage Insurance Companies of America (MICA), 90% of borrowers cancel their mortgage insurance within 60 months, reducing their monthly mortgage payments even more.
5. It’s convenient. Often, conventional loans are faster to close than alternatives like FHA loans.
For example, watch how Genworth Financial was able to help first time homeowner Brian Maguire and his family get into a new home with limited cash and PMI.
For more information on mortgage insurance and why it might be the right option for your family, please visit Genworth Financial to learn how you may benefit from getting the coverage you deserve.