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Your mortgage loan will require mortgage insurance for the life of your loan (unless cancellation is permitted, as discussed below). Mortgage insurance insures the lender for its losses if you do not repay your mortgage loan. Specifically, mortgage insurance insures that percentage of your mortgage loan that is above a stated percentage (usually 80% for your home, or 75% for investment properties or second homes) of value of the property if you do not pay and your mortgage is foreclosed. Mortgage insurance does not insure you. It provides direct benefits to you, however, in that it allows us to make your loan with a smaller down payment and it allows us to sell your loan to an investor in the secondary market (the "investor") and, therefore, make your loan at a lower rate, with fewer costs than may have otherwise been available to you. The cost of the mortgage insurance will be paid by you and will be included in your truth-in-lending disclosure and on your Good Faith Estimate of Settlement Costs. Various types of mortgage insurance, and payment plan options are available. Your loan officer will help you select the mortgage insurance product that fits your circumstances.
Types of Mortgage Insurance
While not all options may be available for all loan types, current options include:
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-Lender Paid Mortgage Insurance ("EZMI") . In return for a slightly higher interest rate on your loan, the lender pays the mortgage insurance premiums. Depending on your income tax situation, you may be able to take greater tax deductions on your loan with this option. You should consult with your tax advisor to determine if lender paid mortgage insurance ("EZMI") would be beneficial to you. Lender paid mortgage insurance ("EZMI") cannot be canceled by you at some later time.
-Borrower Paid Mortgage Insurance . You pay the mortgage insurance premiums. Borrower paid mortgage insurance premiums may be refundable if the mortgage insurance is canceled early. If you select non-refundable premium mortgage insurance, no portion of the premiums you pay will be refunded to you for any reason. Premiums for refundable mortgage insurance are usually slightly higher than premiums for non-refundable mortgage insurance. Borrower paid mortgage insurance premiums can be paid in various payment plans, however, not all payment plans may be available for all loan types:
-Annual Premium . You will pay the first year's at the time of closing, plus you will need to fund your escrow account; subsequently, you will be required to pay a portion of the annual premium each month into your escrow account to pay the annual premium as it comes due.
-Single Premium - Cash . The amount of the single premium will be collected from you at the time of closing as a closing cost.
-Monthly Premium . You will pay premiums in advance at the time of closing, plus you will need to fund your escrow account; subsequently, you will be required to pay a monthly premium as part of your payment.
-Zero Up front Premium . No premium is collected at the time of your closing. You will be required to pay a monthly premium as part of your payment, which may be slightly higher than the regular monthly premiums as described above.
-Single Premium - Financed. There is no out of pocket cost to you at the time of closing. The cost of the single premium will be added to your loan amount.
Cancellation.
-Lender Paid Mortgage Insurance, "EZMI". Lender paid mortgage insurance ("EZMI") cannot be canceled by you. If, for any reason, the lender paid mortgage insurance policy is canceled, any premium refund will be paid directly to the lender. Your monthly loan payment will not change.
-Borrower Paid Mortgage Insurance. Cancellation of borrower paid mortgage insurance, if permitted, will depend on the then current guidelines of the investor. Not all investors permit borrower paid mortgage insurance to be canceled, and those that do may have different guidelines. Investors have the right to change their guidelines at any time. Below are examples of current requirements:
-A minimum number of consecutive monthly payments must have been made. This can vary from as few as twelve months to as long as seven years depending on the type of loan, and depending on the investor's requirements. ARM loans and cash-out refinances usually require longer periods;
-A good payment record
-Receipt of a new appraisal from an acceptable appraiser, paid for by you;
-Current loan balance below 75% to 80% of property value, if the property is owner occupied, or below 60% to 65% of property value if the property is an investment property.
-In the case of ARM loans, a specified number of payments since your last payment increase.
To find out if your borrower paid mortgage insurance can be canceled and the conditions that must be met, you should send a letter to your loan servicer. Different investors may have different cancellation requirements. Your current servicer can tell you the investor's requirements.
This statement reflects current information and could change at any time.
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