Mortgage Insurance Simple Answers
What is Mortgage Insurance?
Mortgage Insurance helps borrowers realize the dream of homeownership sooner by enabling them to purchase a home with less than a 20% down payment. Mortgage insurance provides financial protection for lenders and investors if a homebuyer defaults on a mortgage loan. With this protection, lenders can offer more low-down-payment mortgages to homebuyers.
What are the Benefits of MI?
Mortgage insurance can help a homebuyer qualify for a home with a lower down payment, buy the home sooner, stop paying rent faster, and claim more. Of course, buying a home sooner accelerates building equity and longer-term benefits of homeownership. Even if the homebuyer can make a 20% or more down payment, using mortgage insurance to put less money down potentially makes money available for investments, home improvements or education.
Are Loans with Mortgage Insurance Safe?
Yes. Premiums on mortgage insurance are fixed and do not increase if interest rates rise. A 30-year fixed rate mortgage with MI is a safer alternative to other riskier loan types.
Is MI Tax Deductible?
Yes. At a time when homeowners need relief most, Congress renewed legislation on the tax deductibility of mortgage insurance. For eligible borrowers within certain income limitations, the tax deduction has been extended through 2010.
Tax Deductibility Q&A (pdf | 54kb)
Does Mortgage Insurance Offer Assistance to Struggling Borrowers?
Yes. For families struggling with financial difficulties, mortgage insurance can help preserve the dream of homeownership. Homeowner assistance programs are a built-in feature of mortgage insurance focused on helping families avoid foreclosure and, when possible, keeping them in their homes.
See Homeowner Assistance in detail
Is it Smarter to Choose a Loan with MI over Other Alternatives?
In today’s market, a safer loan is a smarter loan, and borrowers are finding the safety and security of an MI loan much more appealing than other loan types. Mortgage insurance not only helps people get into a home sooner, it offers payment predictability throughout the life of the loan and several programs to help families maintain homeownership should a financial hardship occur. Plus, mortgage insurance keeps the window of opportunity open for a second mortgage, if desired, in the future.
