What Is Lenders’ Mortgage Insurance & How Does It Benefit Me?
The conventional mortgage requires full financial documentation. It lasts 30 years and has a fixed rate. In addition, lenders expect homebuyers seeking to finance their purchases to provide a 20% deposit.
The lending industry has evolved with the times. Many cannot provide a 20% down payment. Others cannot provide full financial documentation. To keep the door of homeownership to the public, it’s possible to obtain a loan without a 20% deposit.
Lenders’ mortgage insurance replaces the deposit. It’s assessed as a percentage of the total loan. The homeowner pays the fee on top of their repayment annually. Lenders place the insurance on mortgages to protect their interests. Without a deposit, the applicant poses a higher risk. If the worst occurs, the lender has a way to recoup their losses.
At the same time, LMI benefits the homebuyer. It takes a while to save $100,000 for a deposit. LMI helps the homebuyer become a homeowner sooner. An LMI charge of $3,000 to $5,000 annually is more palatable than $100,000 upfront.
In addition, some lenders allow the homeowner to pay off the LMI fees sooner. This lowers the monthly repayment amount. Plus the homeowner is building equity and wealth. This provides them with leverage against future home purchases. Once an individual becomes a homeowner and they maintain positive payment history, their financial situation becomes favorable to them.
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Lenders Mortgage Insurance Conclusion
For more information about lenders’ mortgage insurance, contact our Mortgage House loan specialists. They also provide guidance for our mortgage products. Contact our team today.