Mortgage Insurance: Do You Need It?

It is important to know what is mortgage insurance and do you have to pay it when you become a homeowner. Many people don't know much about these things and rely solely on the information that the bank or lender providing. Informing yourself a save you thousands of dollars.

To start with, this is the type of insurance that protects the lender, should you not be able to fill your responsibilities and repay the loan according to the terms. As a buyer, you may be required to have this type of insurance, as you may be rejected if you don't.

There are many factors that will determine what the rate of the insurance on your mortgage will be. And, you should know that they can be quite high, depending on the amount of your mortgage.

In order to avoid this expensive payment, you must make a down payment on the property of at least 20%. Anything below 20% will require you, more often than not, to make that payment toward the private mortgage insurance. Keep in mind, that this percentage is used in the United States and can differ from one country to another.

Should the value of your home change, whether the market price drops, or the fact that you invest more toward the capital at some point during your loan, you may no longer need to pay this insurance. Unfortunately, the good majority of the population don't even know that they are making this payment. That is why it's in your benefit to understand your mortgage loan completely.

With that said, the more you know about it, the more you may be able to save. For instance, the recession in the United States has hit the housing market quite hard, dropping the value of many homes. Therefore, that change the value in your home may be that you do not have to pay for that PMI that you have been paying for, regardless of whether you know it or not.