Here is the definition from the Consumer Financial Protection Bureau (CFPB): “Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get.”
As the CFPB also states, the only party that benefits from the mortgage insurance policy payout is the lender. You pay the extra insurance, and in the event that you default on the home loan, the mortgage insurance company steps in. To save you? No, it is not for your benefit that they step in, but the lender’s. During the foreclosure process, yes the foreclosure process, you lose your home and your credit still takes a hit. What about the mortgage insurance? You have been paying it for all of these years, and the lender gets the payout and your home. Your mortgage insurance company, if you don’t default, pockets your premium every month for years at no benefit to you. Does this seem fair? Not to us.
You were told that in order to secure your home loan, you must add mortgage insurance. For your typical home for sale in the U.S., mortgage insurance can add $100-300/month on top of your monthly mortgage. The average monthly mortgage can be $1,000-$1,500. Here is an article from MarketWatch, which tells us that mortgage payments, as of early last year, absorbed the highest amount of household income since 2010. As of now, we have surely surpassed last year’s level. The mortgage insurance makes your monthly payments more expensive and harder for you to pay.
You want to buy a home, that is good, but remember to buy within your means. Make sure your down payment is sufficient, at least 20%, or your lender will mandate you have mortgage insurance. As we have shown, the only benefactor to this policy is the bank, and it can cost $100-$300 more per month out of your pocket, an extra $1,000-$4,000/year, as Investopedia shows us in their article. Mortgage insurance is a waste of your money. Instead, you could put that same money towards your mortgage, your home, which benefits you.
Here at J.M. Hatcher, we believe in your protection and power through knowledge. When you are ready to buy your home, make sure you have the required down payment. You will save yourself from throwing away $1,000-$4,000/ year for several long years. It is for your benefit that you save up for the down payment, and buy a home within your means. It would be better for you and your spouse to save an extra $300-$450/month, and at the end of the year you would have around $10,000 of your money. Add that to what you currently have. Yes, your money, and put your money towards your home, not towards mortgage insurance that does not serve you nor benefit you.
If you need help saving money, call on us to give you a free auto insurance quote and renters insurance quote. When you are ready to buy your home, we will give you your free homeowners insurance quote. Our clients have saved anywhere from $30/ month to over $100/month. We are about helping you be financially strong, knowledgeable, and prepared for your future. Let us serve you and your family!