Q1:	What is mortgage insurance and when do I need to pay it?

A1:

Mortgage insurance insures the lender against loss in case a borrower defaults on a mortgage. Most lenders require mortgage insurance when the down payment is less than 20% of the home's purchase price, because to the higher loan-to-value ratio creates a higher risk for the lender. Mortgage Insurance is often an unnecessary cost, and in most circumstances, you should work to eliminate it.

Q2:	How much does mortgage insurance cost?

A2:

Mortgage insurance is established at purchase time and may be paid in various forms, such as a lump sum or higher interest rate, but most often, it is included in your monthly mortgage payment. The amount varies from $50 - $300 monthly, equivalent of $600-$3,600 per year, depending on your loan amount and the loan-to-value ratio at purchase time.

Q3:	Is there a tax advantage to paying mortgage insurance?

A3:

Beginning January 2007, mortgage insurance can be a tax deduction. However, in order for it to be deductible, it usually has to be an "itemized deduction", so that will depend on the way you file.

Q4:	How can I tell if I'm paying mortgage insurance now?

A4:

Your monthly mortgage statement lists mortgage insurance as a separate item. Note: Do not confuse mortgage insurance with homeowners or hazard insurance, which insures your home from damage caused by fire or some other disaster or loss.

Q5:	How can I eliminate mortgage insurance from my home loan?

A5:

There are several ways to eliminate your mortgage insurance: Ask the lender to remove your mortgage insurance. To do this, your principal must be paid down enough so the current loan-to-value ratio is less than 80% of the original purchase price. Generally, lenders are not required to remove mortgage insurance based on your home's appreciated value. Note: The disadvantage to this method is that it takes many years to pay down the principal balance, and you may pay thousands of dollars in mortgage insurance in the meantime. Refinance. Homes often appreciate in value over time (sometimes in six months or more), and if your home's appreciated value increases significantly enough, you can remove your mortgage insurance by refinancing, which creates a new loan-to-value ratio. This is a common procedure, although most people are unaware of it until they refinance for other reasons, and then inadvertently remove their mortgage insurance at the same time!

Q6:	Where do I go from here?

A6:

Contact your mortgage broker professional in your area for a free analysis to verify whether it is financially feasible for you to refinance to remove your mortgage insurance.