Mortgage Insurance 101

Protecting Your Home Loan

Mortgage companies like On Q Financial, Inc. require some borrowers to purchase mortgage insurance in order to protect the lender if the borrower is unable to pay the mortgage. However for borrowers, this type of insurance has benefits as well. Getting mortgage insurance allows borrowers to purchase a home before they have a full 20 percent down payment saved. This can open up more opportunities for home buyers.

There are two types of mortgage insurances:

Borrower-Paid Mortgage Insurance

Borrower-paid mortgage insurance (BPMI) is paid monthly or as a single upfront premium. BPMI helps lenders offset the risk of a low down payment mortgage. It also allows borrowers to qualify for a loan with a smaller down payment. Therefore enabling them to purchase a home sooner.

Benefits to Borrowers:

  • BPMI is subject to cancellation when the loan to value is amortized down to 78%.
  • In a booming market with rapid appreciation, it might be advantageous to choose BPMI.

Lender-Paid Mortgage Insurance

Lender-paid mortgage insurance (LPMI) is different than BPMI as the borrower has no monthly payments. Instead with LPMI, the borrower accepts a slightly higher interest rate and/or a higher fee at closing and the monthly paid mortgage insurance is simply bought out.

Benefits to Borrowers:

  • Lower monthly mortgage payment while taking a slightly higher interest rate.
  • If you don’t believe you’ll be in your mortgage for the life of the loan it might be beneficial to select LPMI.

On Q Financial, Inc. works with five separate mortgage insurance companies to ensure that our borrowers are getting the most competitive quote that makes sense for each individual loan.

If you have any questions, or if you would like to find a On Q Financial Mortgage Consultant near you, please click here.