“I Don't Want Mortgage Insurance” - Homebuyer

There is nothing sexy about mortgage insurance to any homebuyer or homeowner. It might feel like it’s just something to protect the big banks and mortgage lenders, but there’s much more to it.

Here’s the reasons you should change your mind about mortgage
insurance with conventional loan financing:

• A better interest rate. Having mortgage insurance can sometimes get you a better rate than the rate you would receive if you used a 20% down payment.
• More money in your pocket. Having mortgage insurance allows you to buy a home without a 20% down payment. I know this seems like, duh... I know that much.

Here’s a few things you maybe haven't considered about mortgage insurance:

• If you wait to save that 20%, you are missing out on the years of potential home value appreciation (home being worth more than you purchased it for).
• If you wait to save that 20%, you are potentially missing out on years of building equity by paying money towards rent instead of having it go towards your principal balance of your mortgage. You’re making your landlord money instead of yourself!
• If you wait to buy until you have 20%, the same home will likely cost you more money. The price of housing tends to increase year after year. Do you really want to spend an extra $60k on a home that you could have bought cheaper 3 years ago just because you hated the idea of mortgage insurance so much? It also means that you may need to wait even longer to save that 20% down payment.

Here are some common comments I hear regarding mortgage insurance:

• "I found a loan program with no mortgage insurance."
  
  These loan programs have been available in the past and they seem to go in and out of style. But they often result in a higher interest rate to the borrower. These loan programs are likely what the industry refers to as "portfolio products", meaning that the lender that you borrow the money from keeps the loan on their own books (rather than sell it to investors). As a consumer, this isn't necessarily something you should care about because it doesn't matter who you make your monthly mortgage payment to. However, the issue with this is that they may not always meet traditional lending guidelines, which is why the loan may need to stay with the original lender. Since the original lender may be unable to sell this loan as an investment vehicle, they are taking more of a risk. Whenever a bank or lender takes more risk, it means a higher interest rate to the borrower. If you are paying a higher rate for a "no mortgage insurance loan" it's essentially the exact same thing as having "lender paid mortgage insurance", which does meet traditional lending guidelines.
• “My friend just bought a house, and they don't have mortgage insurance.”
  
  It was either the above situation, they had a 20% or more down payment, or possibly they don't understand the loan they just entered into.

If you want to learn more about mortgage insurance and the benefits of having it on your mortgage loan, let me know!

Kait Spurrier
Sr. Mortgage Banker
NMLS# 1277963
O: (410) 794-4127
kspurrier@apexhomeloans.com
apexhomeloans.com/kait-spurrier