Factors to Pay Mortgage Insurance

Posted on March 23

Question: My wife and I purchased our home in AZ on 5 year adjustable mortgage. We do not pay a monthly mortgage insurance payment. Now, we are $70k upside down in the home, I contacted our mortgage company to participate in making Home Affordable program, but, they told us, our home will not qualify, because, the lender was required to pay mortgage insurance. They could not tell me the mortgage insurance company name and I do not have any records on the contract how is this possible and what are my options. I can not believe, I am the only person in this situation!

Answer:
You are definitely not alone! It’s important to understand that, it’s not your current service provider.

The program was designed so that, you don’t have MI to refinance at new lower rates. The Guidelines were written so, 2nds could be subordinated to allow significant negative equity, and people that put 20% cash down didn’t have to get MI on a new loan. It is a wonderful program, but, like most programs, there are some people that just don’t fit the mold.

However, the MI companies, at least to my knowledge, were never able to facilitate a program to allow people to reduce their rates. I gather, the Govt didn’t want to bail out the MI companies – which is what would have happened in your case, since, the MI company is at risk with so much negative equity. It is boggling to me, a program could not be provided for people that pay their bills on time, but, have MI.

Although a better understanding of what’s behind the curtain might help you, the information won’t help you get a new loan with today’s great fixed rates.

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They can be very good or very bad. You can opt for a monthly check, but, I would never suggest that. You are better off taking a line of credit to use when needed. The bank pays off your current mortgage and you never make any payments back. Money is not due on the mortgage until you die, sell the home or move out for more than 12 months. Be aware, you will be accumulating a monthly handling charge and that the interest rates are not very low and that the cost for initiating the mortgage will all be added into the final cost to be payed back. You will never outlive your loan since they only give you about 80% of the value of your home. A lot of seniors take the whole sum and lose some of their benefits which are based on assets and income and others end up giving the money to children or blowing it on junk. If you are low income and need cash to pay your home taxes, home insurance, premium on long term care insurance, needed repairs to the home inclusing accessibility ones or pay for additional services to remain at home rather than in a nursing home, this type of mortgage can be very helpful. They are great for some situations, but, not good for all. Be sure that, you go with one of the top three companies and have family & friends be with you during all the discussions and paperwork.

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