Lender’s Mortgage Insurance: 3 Things You Need to Know
Those who finance their home purchase repay the principal and the interest rate charge. There are also fees, taxes and charges. Applicants who put down less than 20% deposit incur the Lender’s Mortgage Insurance fee. The exact rate varies, but it is a charge to expect. Here are three things you should know.
Protects the Lender
Financing a home purchase means borrowing a large amount of money. The lender puts themselves at risk because they do not know if it will be repaid in its entirety. Lenders put in mechanisms to protect their interests so they can continue lending funds to others. A 20% ensures a new homeowner has a stake in the purchase. The deposit motivates the buyer because it is their money, too. Applicants who cannot place a 20% deposit up front pose a risk.
Lenders do not reject all applicants who put down less than 20%. Instead, those who are approved, incur the Lender’s Mortgage Insurance fee. The insurance protects the lender at your expense.
Typically, the insurance charged starts at $800. It is expressed as a percentage of the total home loan amount, which hoovers around 4%. To receive the exact fee, contact our financial professionals for more information.
How to Avoid It
To avoid the insurance charge, put down at least a 20% deposit up front. Otherwise, it will be added to the other fees, taxes and charges. This is not a charge that is waived, but you can still discuss your options with our team representatives. After you receive the amount, you have two options to pay it. Some lenders allow applicants to add it to the principal amount borrowed, which increases the interest you are going to pay, too. Your other option is to pay off the insurance charge up front.
Lender’s Mortgage Insurance Conclusion
The purpose of Lender’s Mortgage Insurance is to protect the lender. The amount varies on several factors, but the amount reaches the thousands. To avoid the charge, your deposit must be at least 20%. After the deal closes, you may be able to pay it off separately. To discuss the details, contact our Mortgage House professionals. We can also discuss your mortgage choice options.