10 Financial Benefits of Mortgage Insurance

Are you dreaming of owning a house and have been saving for it, but worried about if you are unable to repay the complete loan? If the answer is yes, then mortgage insurance may be the answer for you. To put it in simpler terms, mortgage insurance is a risk management solution. It is an insurance policy and a contract that shields the lender or the financial institutions from losses, if the borrower defaults. Additionally, it goes into force when the borrower is unable to make the payments due to illness, disabilityor loss of employment or passes away.

Usually the mortgage insurance is required, if the down payment for your house is less than 20%. By using reputed and experienced financial planning services you can plan and execute your finances better. Here are 10 benefits of taking out mortgage insurance:

#1- Invest Better- Take a Mortgage, don’t Pay Rent

By taking mortgage insurance policy, you can plan on investing in a home and pay your lender the amount that you would have paid as rent. Being proud owner(s) of a property is a sound investment.

#2- Buying a Bigger Home

The major advantage of MI is that you can think of buying a bigger house within your present resources. For example: You can pay 20% down payment for a house that is available for $75,000. You now decide to take Mortgage Insurance with financing option. This gives you the ability and the option to make a down payment of 10% on a house that is available for $150,000 or you can even opt to buy a much bigger house for $300,000 after making a 5% down payment.

#3- Enhance Investment Options

You can broaden your financial options as financing with the mortgage insurance gives you more control on how you will like to spend your resources. For example: You decide to buy the house that was worth $150,000. Ideally after taking the insurance policy, with financing, you would pay 10%. But you have the option of paying only 5% of the value as down payment also. So you decide to opt for this option and save the remaining 5% or $7,500.

#4- Get Better Interest Rates

As mortgage insurance provides the lender with greater flexibility, the lender passes on the benefit to you. These are in the form of competitive rates that are available to the home buyers that have paid larger amounts, as down payment.

#5- Overcome the Traditional Barriers of Financing

Many people fail to qualify for home mortgages despite having good credit rating, because you do not meet the conventional lending criteria. Most self-employed and those working on commission usually do not qualify for the loans, as they do not meet the criteria. However, you become eligible for home mortgages and low interest financing options once you opt for the mortgage insurance. This is because the lender is not at risk anymore, even if you default on the loan.

#6- Use it to Invest in Vacation Properties

If you are financially sound and planning to buy a vacation property, then you can avail of the mortgage insurance, to cover the mortgage that you take on the exotic location investments.

#7- Transferable Mortgages

If you are taking on transferable mortgage, then you have the option of transferring its terms to your new property in future. The same option is also available when you have the mortgage insurance so that you can save on few premiums and get better interest options.

#8- Stay Current on your Mortgage for Better Deals

If you pay extra premiums and payments or the value of your home appreciates appreciably and your loan balance comes down to below the level of 80% of its original value, then you can even think of cancelling your mortgage insurance.

#9- Save on the Household Purchases

If you are a mortgage insurance policy holder, then there are few financial institutions that have added privilege program wherein you can save on your various household purchases. Thus, you can save more when you furnish your new home.

#10- Lower Taxes

As a mortgage holder, the mortgage insurance premiums that you pay are now tax deductible and it is not even restricted on the first home purchase.

Author: Richard Casteel

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Richard is the chief author of this blog. He worked as a financial advisor in money market form last 10 yrs. His financial sense in Share trading and any other trading is just outstanding. He just shares his knowledge and experience through this blog. You can contact him directly though CFD-Providers.com.

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