Getting a mortgage allows you to be able to get the house that you want. A mortgage allows you to use a percentage of the purchase price as a down payment and then finance the rest. There are things that your mortgage company may insist that you have in order to get your mortgage. One of those things is mortgage insurance.
Mortgage insurance isn't a protection for you. It's a protection for your mortgage company. It allows them to make back some of their money in case you have problems with paying on the loan. This means that their risk is lowered. This can mean that you can get a higher mortgage than you would otherwise be able to get.
Mortgage Insurance Requirement
While there are some mortgage companies that will require you to get mortgage insurance no matter what when you get a mortgage, the most common time to get insurance is when you put less than 20% of the purchase price down as a down payment.
Mortgage Insurance Payments
While mortgage insurance does make it possible for you to get a mortgage that you wouldn't otherwise be able to get, it does increase your mortgage payments. That's because the premiums are usually added into your mortgage payments. You may also have the cost of your mortgage insurance added into your closing costs.
Cancelling Mortgage Insurance
You can get rid of your mortgage insurance after having your loan for a while. There are things that you can do in order to show that you are a good risk and to even lower the amount of your overall mortgage payments. One of the things you can do is pay ahead on your mortgage. If you add in a little bit of extra money into each mortgage payment, you drop your overall mortgage faster. Since your payment will be separated into mortgage insurance, interest, and principal, you will pay some on the interest and some on the principal. Lowering the principal lowers how much interest you have to pay. A lower principal amount means that the mortgage company's risk is lowered. Once you get your remaining loan down to a certain level, you can cancel your mortgage insurance, which will allow you to put more money on the interest and principal of your loan. How much you need to lower your loan amount depends on your mortgage company, and they should tell you the amount you need to aim for.
Buying the home of your dreams generally means that you need to take out a mortgage. Mortgage insurance may be required for you to get that mortgage.
For more information, contact a company such as Commonfund Mortgage Corp.