Mortgage Insurance

'Mortgage insurance' is a term that you will surely come across if you are going for a mortgage loan. Let's get straight into finding out what this term ('Mortgage insurance') means.

Mortgage insurance is a great tool for both the borrower and the mortgage lender. By definition, mortgage insurance provides protection to the mortgage lender in case the borrower defaults on the mortgage. Mortgage insurance covers the loss that a mortgage lender can incur in such a circumstance. So besides taking title to property, the mortgage lender is also protected against loss by mortgage insurance. The premium of this mortgage insurance is obviously paid by the borrower and there are different ways in which the borrower can pay this mortgage insurance premium e.g. one way is to include it as part of the monthly mortgage payments that are made to the mortgage lender (who in turn passes on the amount to the mortgage insurer).

However, how does mortgage insurance provide benefit to the borrower?

Since mortgage is a big financial transaction, the mortgage lenders need to safeguard their interests in all possible way. So, mortgage lenders require the borrower to demonstrate their commitment to the investment. One way of showing this commitment (and the ability to pay monthly mortgage payments) is to make a down payment. The mortgage lenders generally ask for a down payment of around 20%. However, if the borrower goes for mortgage insurance, the down payment amount may be significantly reduced by the mortgage lender. So, a borrower might be required to pay only 5% or 10% as mortgage down payment instead of the mandated 20% or whatever. This means that mortgage insurance is especially good for people who don't have enough cash to make large down payments (as such 20% is quite a big amount in itself). Such people can save on cash by going for mortgage insurance. Moreover, since mortgage insurance provides a lot of confidence to the mortgage lenders (in terms of their investment being safe), the processing of your mortgage application could be faster and smoother than what it would have been without mortgage insurance commitment. So not only does mortgage insurance increase the buying power of a borrower it also provides him/her with benefits in terms of getting a good mortgage deal and getting it faster.

So, mortgage insurance is really advantageous both for the borrower and mortgage lender and the onus lies on the borrower to hunt for a good deal on mortgage insurance and also on the mortgage itself.

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No Cost Mortgage Refinance

Many mortgage lenders and banks are offering "No Cost" or "Low Cost" mortgage refinancing options. These are often advertised as a great way for homeowners to avoid paying the thousands of dollars typically required to refinance a home loan. Here are some things homeowners should know when looking into a no cost mortgage refinancing.

At first glance, a no cost refinance seems like a great way to avoid having to pay the typical mortgage refinancing fees and costs, especially for homeowners who are having financial or mortgage problems. While theses refinancing options may provide some benefits to some homeowners, it is best to fully understand what you are getting yourself into. While the fees or costs of refinancing may not be need to be paid upfront, there are often long term costs.

A mortgage refinance option with no costs for the homeowners means that the loan origination costs, appraisal fees, lawyer costs, and other fees will be paid by the mortgage lender or bank. A lot of times, the lender or bank may tie these costs into your home loans total amount, and you will be paying that fee for years, with interest. Although this will prevent you from having to fork over thousands of dollars in mortgage refinancing fees, it is not the definition of "No Cost" by any means. The costs are just over the course of a longer term, and often result in costing you much more due to interest that would need to be paid on this borrowed amount.

While no one will openly admit it, the fact is that often a homeowners interest rates, or total home loan amount needed to borrow, will increase. This increase will help cover the expenses, and generate profit, for the mortgage lender or bank who initially offered this no cost mortgage refinancing deal. While the amount the interest rate or loan amount will increase varies from lender to lender, you can be assured that they are in this to make profit. While this is fair, homeowners need to be sure what the true costs are, as opposed to believing that true no cost refinancing options exist.

While this may not be a bad refinancing option for some people, it will be a bad decision for many. The costs are going to dramatically increase over the length of a home loan which is typically 15 to 30 years. The whole time of the home loan, you will be paying interest on these added fees. Just be careful and cautious when pursuing a no or low cost refinancing option.

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