Do you need mortgage insurance? Mortgage and Corporate Tax Compliance Expert Vince Iannello discusses options


Mortgage default insurance is specially designed to protect your lender if you buy a home with a mortgage.

NEWMARKET, ONTARIO, CANADA, July 7, 2021 / – Mortgage default insurance is specially designed to protect your lender if you buy a home with a mortgage. If you are making a down payment of less than 20% on a home, it is prudent that you understand your private mortgage insurance and choose the one that meets your needs. Vince Iannello, a professional in accounting and tax advice to individuals and businesses, says many people cannot afford the required 20% down payment. Others just prefer to make a smaller down payment and use the remaining amount for repairs, furnishings and other emergencies. It explains some of the various options available to potential home buyers.

Mortgage loan insurance paid by the borrower:

Mortgage loan insurance paid by the borrower is the most common type of private mortgage insurance (PMI). The policy comes in the form of an additional monthly fee that you pay on top of your regular mortgage payment. You will have to pay BPMI every month until you have at least 22% of the equity in your home. At this point, your lender will automatically cancel this insurance as long as you are up to date with your mortgage payments. Vince Iannello points Be aware that there are several ways to get your BPMI canceled at 20%, depending on your repayment plan and your proactivity. For example, you could refinance or pay off your mortgage principal to get the 20% equity. Talk to your insurer to find out which method is best for you.

Single Premium Mortgage Loan Insurance:

This type of mortgage insurance is also known as single payment mortgage insurance. It just means that you pay for mortgage insurance in a lump sum at the start or at the end of it. SPMI has valuable benefits, such as a lower monthly repayment that allows you to borrow more. You also don’t have to worry about refinancing to get your PMI canceled, and you don’t have to monitor your progress to know when your PMI will be canceled. According to Vince Iannello this type of policy provides the peace of mind you deserve while you are working on your investment. However, he warns that there is a potential financial loss if you intend to sell the property in a few years as the lump sum is non-refundable.

Mortgage loan insurance paid by the lender:

Lender Paid Mortgage Insurance or LPMI involves the lender paying the mortgage loan insurance premium and then increasing the interest on the loan to cover the amount. Usually your lender will tell you that private mortgage insurance is included with your loan. So you don’t have to worry about reaching 20%. However, you are likely to pay more in the form of interest than what you would have paid by doing it up front. You should also keep in mind that you cannot cancel the LPMI when you reach 22% because it is built into the loan. Your monthly repayments are also higher to cover the cost, and mortgage loan insurance paid by the lender is non-refundable. Vince recommends that you carefully assess your needs before choosing this type of mortgage insurance.

Don’t blindly choose an insurance plan; Always consult with mortgage experts like Vince Iannello to get the most out of your policy. Work with someone you trust and invest time in the options available for more flexibility.


Vince Iannello
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