That Nasty Mortgage Insurance.what is it?
What is "mortgage insurance" or "private mortgage insurance"? It's part of your total monthly mortgage payment in many cases. "Mortgage insurance" is usually referring to FHA loans, while "private mortgage insurance" usually refers to conventional loans, which obtain the insurance through private insurance companies. A few of these would be MGIC, Genworth, and Radian. FHA is short for Federal Housing Authority, which provides the program which insures those loans, but they do not actually provide the funds for the loans. The same with VA, and USDA, they insure but do not fund loans.
Why do I need mortgage insurance? Once upon a time, long before you and I were born, you had to "Save Up" at least 20% of the sale price to pay a down payment on a home. The reason is that banks had determined that it cost them about that much to foreclose on a buyer if they did not come through with all of the payments.
Why I need mortgage insurance? It protects the lender against default (borrower does not pay back the debt).
When subprime lender came into the picture, these loan types required very little down payment and had no mortgage insurance. When the borrower could not pay, and the property was foreclosed on and sold, the borrower could be sued for any deficiency balance. This was one of the major contributors to the losses that led to the economic downturn, or “mortgage meltdown”.
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Andy, thanks for your comment. I totally agree, but my opinion does not matter! In fact, it doesn't matter unless you are the one holding the bag of money, Good credit and money down.
And if I were the one lending the money, you'd better believe that I want the borrower to have some "skin in the game", in other words, some of their own money. And do you where the funds mostly come from? People's retirement accounts.....wouldn't you want them to be
careful with your retirement funds?
that was a very good post about that mortgage insurance and what you are speaking about is in the US or is in in Canada too
Willie
Thanks for your comment! I don't know beans about Canadian mortgages! I barely can keep up with the U.S. ones!
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For current homeowners who owe a lot, while the property values are up again, and rates are so low, why not consider refinancing and possibly getting rid of the PMI? It is all about your balance owed versus your property value.