Here is some quick advice about Mortgage Insurance: Stop being afraid of it! There are many rumors about Mortgage Insurance that create a skewed perception for borrowers.
Week after week, someone always tells us, “We are waiting to put 20% down to buy a house” or “We don’t want to pay mortgage insurance, so we are waiting for more money to put down.”
Mortgage insurance technically is required on loans that don’t have more than 20% equity. This protects the lender against a portion of a loss in case of a loan default.
With that said, one of the biggest myths in the mortgage industry is busted. You do NOT need 20% down to buy a house. Now let’s learn a little bit more about mortgage insurance, down payments and benefits of buying vs. renting.
- The benefits of owning a home far outweigh those of renting EVEN if you do have some monthly mortgage insurance!
- The interest and real estate taxes you pay each year are tax deductible while you get no tax advantages from renting.
- Each month you pay your mortgage, you are paying down principal on your mortgage.
- With rising rents, a new mortgage is often less per month than renting.
- A home is an asset that will likely appreciate over time increasing your wealth.
- Mortgage insurance really isn’t that expensive! Let’s say you bought a house for $250,000 and put 10% down. You’d be financing $225,000. The MI on that is only $35/month.
- Mortgage insurance will fall off once you reach 20% equity in your home.
- Borrowers with a credit score greater than 700 can easily get a loan with as little as 3% down and have no mortgage insurance at all.
It’s time to start looking at mortgage insurance as a cost of getting your mortgage vs. a reason not to buy. So, go ahead and find your dream home!
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Use our free mortgage and amortization calculators to determine your monthly payment, including mortgage insurance, taxes, interest, and more.