How Mortgage On Your Greenville NC Real Estate Really Works

By
Real Estate Agent with RE/MAX Preferred Realty

When you buy Greenville NC_ real estate without a down payment of at least 20%, the lender, be it FHA or a private mortgagor, requires that you purchase mortgage insurance to protect it against financial loss.  Mortgage insurance, not to be confused with mortgage life insurance or homeowner’s insurance, assures the lender of no financial loss or a very reduced one) if you default on the loan.

mortgageThe cost of this insurance—from .25 to 6% of the loan—is almost always the responsibility of the buyer of Greenville NC real estate.  (There is such a thing as lender-paid insurance, but this type carries a higher interest rate and is non-refundable.)  Usually the borrower has a choice of payment plans, which included the following:

Annuals. The borrower pays the first-year premium at closing; an annual renewal premium is collected monthly as part of the total monthly house payment.

Monthly Premiums. The cost is slightly more than traditional mortgage insurance plans but monthly premiums dramatically reduce mortgage insurance closing costs. Borrowers pay for mortgage insurance monthly as part of their total monthly house payment but need to pay only one month's mortgage insurance premium at closing, rather than one year's.

Singles. The borrower pays a one-time single premium (instead of an initial premium and renewal premiums). Since single premiums are typically financed as part of the mortgage loan amount, no out-of-pocket cash is used for mortgage insurance with a nonrefundable premium at closing.

These plans offer the choice of refundable or nonrefundable premiums. A refundable premium allows the borrower the opportunity to receive money back on any unused portion, in the event that mortgage insurance coverage is discontinued before the loan is paid in full. The cost for a nonrefundable premium is slightly less than that of a refundable premium, thereby giving the borrower a small savings. If coverage is discontinued on a loan with a nonrefundable premium, the borrower has no opportunity for a refund.   If you are unsure which plan is best for you, visit your state mortgage insurance office.

Unfortunately, rumors and myths abound about the difficulty or even impossibility of cancelling refundable mortgage insurance.  Fortunately, however, the Homeowner’s Protection Act of 1998 requires lenders of insurance loans for Greenville NC real estate to notify consumers of their rights in this regard on a yearly basis and to automatically cancel the insurance when the mortgage has amortized to 78% of the original property value.  In addition, you may apply for cancellation of your mortgage insurance when that percentage reaches 80%.  For specific details of the HPA requirement in terms of timing and content of these notices, click here

While paying for mortgage insurance does entail an extra expense for the home purchaser, it also has its benefits.  It allows new buyers to become a homeowner sooner than if they needed to have a 20% down payment and greatly increases their buying power.  Repeat buyers can gain a significant tax advantage by having more deductible interest to claim.  They can also use the money saved by not putting down 20% to cover moving costs or to put into other investments.

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Whether you are considering buying a home, selling a home or both, Liz Freeman knows the Greenville, North Carolina area inside and out.  Most of her team members were born and raised in Pitt County, NC which has provided them with strong ties to the area, allowing them to become a successful Greenville NC real estate team.

Liz Freeman and her team have distinguished themselves as leaders in the Greenville NC  real estate market. Liz assists buyers looking for Greenville NC real estate for sale and aggressively markets Greenville NC homes for sale. Liz is also a Certified Distressed Property Expert (CDPE), avoid foreclosure and short sale expert, committed to helping families in financial hardship find options to foreclosure. For more information you can visit Liz Helps.com. You can reach Liz by filling out her online contact form or give her a call.

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greenville nc real estate
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Rainer
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Robert Amato
Bob Amato of Empire Home Mortgage Inc - East Meadow, NY

Very well stated Liz. Typically I advise my clients to contact the lender when they own 21% of the property to ask about when and how to get the MI cancelled.

Feb 16, 2012 01:29 PM #1
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