Why Mortgage Insurance is not such a bad idea?

1. What is Mortgage Insurance (MI)?
Normaly, if you do not have at least 20% down of your funds in the house (in other words, you are financing more than 80% of the house value), the lender charges you Mortgage Insurance monthly. For loan amount $315,000, MI might be between $130-145/month
2. Reasons why MI is not a bad idea?
a. Only recently, MI became tax deductible (with conditions until 2010)
b. You can also cancel without refinancing when you have 20% down. In other words, all you would need to do is to call your lender and ask him to cancel MI if you either reached 20% of house value by paying it or by reevaluating the house value.
c. You can have eliminate MI from the begining if you have 2 mortgages. They call them 80/20 meaning one mortgage cover 80% house value, but not to pay MI, person took 2nd mortgage of 20% house value. However, if you have only one mortgage with MI, you may have easier access to equity because you only have one mortgage, but not 100% financing as 80/20 might be.
d. 2nd mortgage of house value almost always has variable rates; therefore, variable payments. With only one mortgage with MI, you will have predictable payments and no variable rate.
3. Is there 100% financing with no MI?
Yes, No MI loans are available up to 100% on conforming and 90% on Jumbo.

When you shop for loan make sure you understand all fees. Interest rate is not the only important number. For instance, you may have the lowest rate available out there, but your monthly payments would be higher than your friend' with highest interest out there. why?

I will try to explain to you tomorrow....

Marina
801-649-5883