What Is MI?
Posted on April 17, 2020
What are you paying for when you make your monthly mortgage payment?
A lot of new homeowners don’t realize that your mortgage payment is actually paying for more than just your mortgage loan. Your actual payment is the sum of PITI:
P = Principal
I = Interest
I = Insurance
In fact, the insurance portion of your monthly payment actually consists of TWO TYPES of insurance. HOMEOWNER’S Insurance and MORTGAGE Insurance.
Homeowner’s Insurance: Homeowner’s insurance is chosen by the homeowner, allowing you to shop around for quotes to get the best deal for you. Homeowner’s insurance protects the home and its contents from fire, theft, and disasters depending on the extent of your policy coverage.
Mortgage Insurance: Protects your lender against default of the loan and is REQUIRED for any loan with a down payment of less than 20%. Mortgage insurance is actually what allows homeowners to get a home loan with less than 20% down payment, opening the door to homeownership for many individuals.
In the case of Conventional loans Mortgage Insurance will automatically be dropped from your monthly mortgage payment once 20% equity is reached. However, for some loan programs such as the Federal Housing Assistance program, Mortgage Insurance lasts the life of the loan unless the homeowner chooses to refinance into a different loan type.
I’d love to talk more about what a mortgage payment would look like for you and the best strategies for becoming a homeowner NOW! Book a call today! 👉