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Mortgage Insurance Options

Four Mortgage Insurance Options

We thrive on options, if for no other reason than because we like to ponder which choice best matches our identity. Like any good accessory, mortgage options compliment your financial decision but understanding them all can be daunting. Today, I'm going to discuss the options available for paying mortgage insurance and, with any luck, provide you with some financial flexibility. 
Mortgage insurance is required by your lender when you have a down payment less than 20 percent. There are different mortgage insurance providers and no doubt you've heard of them: FHA, VA, and USDA. These are all government insurers. The private sector has companies that offer private mortgage insurance, such companies as Genworth, Radian and MGIC. Today we are going to explore those private mortgage insurance options.
1. Monthly Premium
The most common method of paying mortgage insurance is monthly which is easy and convenient because it's added into your monthly mortgage payment. You'll pay it until your loan-to-value reaches 78%, or until you meet other lender requirements. But, it can be expensive and will increase your mortgage payment which erodes your purchasing power.
2. Single Premium
With this option you will pay the entire sum of insurance in a single, upfront premium. If you can't pay in cash your lender might be able to finance it - an option even available purchases. This is advantageous because it spreads the premium over the term of your loan which will reduce your monthly payment. You will, however, pay interest on that premium through the life of the loan. But, if a lower payment is what you're after, this option might get you there.
3. Split Premium
Here the premium is split between the monthly and single premium options. You pay a small upfront but still have a monthly premium, albeit a lesser one. This option takes the pros of both the monthly and single premium while limiting some of the cons and will allow flexibility where needed.  
4. Lender Paid Premium
With this option the lender pays the entire mortgage premium. It sounds great, like getting a free pair of shoes. But, as the saying goes, there is no free lunch. Often the lender will agree to pay the premium only if you take a higher interest rate or pay more fees. It might be a favorable option but make it a point to understand the tradeoff.
Private mortgage insurance companies work hard to offer competitive options, those that will match your mortgage product with class. As always, discuss things with your mortgage lender and let them guide you into a product that works best for you. 

If you are considering Mortgage Insurance Options
Please feel free to call to discuss
Casey Moseman

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