Lender Paid Mortgage Insurance, an old concept with a new twist

By Michael Mapes, The Responsible Mortgage Lender

Like old yeller it is hard to teach a new dog new tricks, in the world of mortgage financing we are continually finding new ways to open doors to potential homeowners and those wishing to escape adjustable rate mortgages in a declining market place.

One example of an old idea that has a new twist is Lender Paid Mortgage Insurance.  It works very simply.  Suppose you are purchasing a 100,000 home and going to put a down payment equal to 10% of the purchase price.  A normal loan at 6% would have a principal and interest payment of $540.00, taxes and home owners insurance would equal about $150.00 and mortgage insurance would equal about $48.60 for a total payment of $738.60.  Lender paid mortgage insurance would carry a rate of about .50% above the normal rate.  So at 6.5% your principal and interest payment would be $569.70 add to that personal property taxes and homeowners insurance and a new payment would be $719.70 or roughly $19.00 less per month.  While, $19.00 may not seem like much and perhaps its not.  However most borrowers today are not borrowing 90,000.00, they are borrowing 190,000 - 250,000.00 and at those levels lender paid mortgage insurance will save a homeowner 50-60.00 per month on average.  This translates into huge savings month over month and year over year.

When comparing mortgage financing options looking at lender paid mortgage insurance could save you money, allow you to purchase more a home and provide you with a higher tax deduction at the end of year.  As consumers look for more financing options to finance their home purchase new and creative uses of old methods is proving to a safe harbor in uncertain times.

Michael Mapes can be reached for comment at 757.599.1810 ext 225 or on the web at http://www.theresponsiblemortgagelender.com/ or apply online at www.suntrustmortgage.com/mmapes