Mortgage Insurance

  

Categories: Mortgage, Insurance

See: Mortgage. See: Private Mortgage Insurance - PMI.

You’ve had a bumpy financial career. You’ve had a couple bankruptcies, a few divorces, and you’ve skipped out on a couple dinner checks by sneaking out the bathroom window. Now you’re applying for a mortgage, and the banker across from you is flipping through your paperwork with an extremely skeptical look.

You might have to get some mortgage insurance to get the deal done. And in many settings, mortgage insurance in one form or another, is required when buyers of homes put less than 20% down. Why? Bank risk. If there's a 20% cushion, even if the $500,000 home with $100,000 having been put down sells for $415,000, the bank likely gets all or most of its money back.

This product works like normal insurance (like life insurance or car insurance), except that it protects your mortgage lender against the possibility that you default on the loan. If you stop paying (the mortgage equivalent of sneaking out the window), the insurance will reimburse the bank for the cost of the loan. The catch: its costs are not tax-deductible.

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Finance: What is a Reverse Mortgage?6 Views

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Finance allah shmoop What is a reverse mortgage All right

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people let's start with a normal mortgage You put one

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hundred grand down borrow three hundred grand and are the

00:12

proud new owner of this baby in palo alto california

00:15

You make payments for thirty years at five percent interest

00:18

and then you retire their debt free So that's a

00:21

mortgage but what's a reverse mortgage Like one of these

00:25

egg trump Well kind of at least financially the payments

00:29

go in the opposite direction of a normal mortgage Like

00:32

you're old you just want to live out your remaining

00:35

years with the basic comforts Shower seats stair lift high

00:39

absorption adult diapers You own all of your home No

00:43

mortgage on it You paid it all off The home

00:45

is now worth a million box Nice shoebox There you

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can do a reverse mortgage pledging your home is an

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asset and basically just receiving a payment of l say

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five grand a month from that reverse mortgage and you'll

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get to deduct interest costs as you go Justus if

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it were a normal mortgage well after forty months you

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you know croak in that time period you've taken out

01:09

Forty times five grand or two hundred grand in loans

01:12

plus some interest and you sell your home for a

01:15

cool million Rather your heirs dio So what happens now

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Well they just take the million bucks from the sale

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write a check for two hundred grand and change to

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the bank to pay off the reverse mortgage that you

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had accrued while you were you know wasting away to

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nothing and your heirs end up happy like they miss

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you But you know a free stair lift Who are 00:01:37.997 --> [endTime] you

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