Mortgage types and Private mortgage insurance
Go into the real estate market and you are sure to come across this term mortgage. So what does this term actually mean and in what context is it being used? Let's find out. If we were to define Mortgage in the simplest way it may turn out to be a legal document that pledges a property to the lender/creditor as a security on your payment for debt help. Not clear? Well, to put it in other words a mortgage is a security, which you as a loan taker give to your creditor, so in case you fail to pay the cash advance loan online in the stipulated term, the creditor takes control of the security, which may be in the form of your home/property.
Types of Mortgages
Now mortgage is a term which is very specific to the real estate industry and has many variations. Let us look at some well known types of mortgages.
Fixed Rate Mortgages
A fixed rate mortgage as the term suggests has a fixed rate of interest and fixed monthly payment through out the length of the mortgage. The rate of interest is set at or before the time of the loan procurement. Like for instance 30-year fixed rate mortgages, biweekly mortgages, convertible mortgages etc.
Adjustable Rate Mortgages
Also known as ARM an adjustable rate mortgage may have a fixed rate of interest and fixed monthly payment initially but this may be only for a specific period of time and is likely to change afterwards.
A balloon mortgage is a rather unique type of mortgage plan. A balloon mortgage has a fixed rate of interest and fixed monthly payment only for a specific/predetermined period of time, e.g. 5 years. After that time gets over the entire due amount has to be paid as a lump sum.
When you are going for mortgage loans it's always advisable not to jump into any deal without proper examination. Although there is enough competition in the mortgage loan market it will be wise to compare different vendor rates, policies and make sure there are no hidden costs or dangers involved.
Private mortgage insurance
Mortgage insurance as the term suggests is an insurance contract that insures the creditor/lender against any unexpected losses that might happen in a mortgage deal. Mortgage insurances are being offered by both private as well as governmental bodies and the competition among the insurers is increasing as more and more people are beginning to realize the importance of taking a mortgage insurance. A private body offering mortgage insurance is referred to as a PMI or Private MI.
Why go for private mortgage insurance?
If you are in a situation where you have to compromise on your dream home just because you don't have enough money for down payment, then private mortgage insurance is just for you. Private mortgage insurance could help you get a mortgage loan at extremely low down payments even from a zero down payment rate in many cases! Want to know how?
Well private mortgage insurance gives protection to the lender against any possible losses and because of this the lender usually lowers the down payment as down payment is nothing but a security measure. Generally the down payment for any house loan is fixed at around 20% but private mortgage insurance may reduce it to as low as 3 - 5% and in many cases to zero. Thus with a PMI you can buy your dream house much faster and without any compromise.
When can I cancel my Private mortgage insurance?
You need not worry much about the termination of the insurance as it will be automatically terminated once you have amortized to 78% of the actual value of your house. These policies are covered under the US federal law.
There may be other options to pay a lower down payment like getting a VA mortgage, going for FHA home loans and a few others; but getting a privateMI is the best possible way that involves no complications and is open for everybody.