Insurance Against Rising Mortgage Payments

Insurance Against Rising Mortgage Payments
There's good news for those shocked by rising payments on​ interest-only and adjustable-rate mortgages .​
It's possible an​ insurance product may help eliminate some of​ the​ stress .​
Interest-only loans and adjustable-rate mortgages,​ made popular when interest rates dipped below 5 percent,​ made low monthly payments possible even when borrowers put little or​ no money down.
However,​ many homeowners are now seeing payment increases as​ low introductory rates increase and interest-only periods end .​
Experts believe the​ increases are contributing to​ rising foreclosures-up 45 percent in​ January,​ according to​ foreclosure listing service RealtyTrac .​
One trillion dollars worth of​ mortgages will reset to​ new interest rates next year-we could be facing a​ major crisis,​ said Bill Ruh,​ Government Affairs Director of​ the​ California-based Citrus Valley Association of​ Realtors .​
Buyers may think they can only purchase a​ home using a​ short-term or​ fancy combo loan,​ but the​ reliable 30-year-fixed mortgage is​ an​ attainable and secure option.
While many have tried to​ avoid it​ in​ the​ past,​ new types of​ private mortgage insurance (MI) offer that secure option,​ providing a​ lower monthly payment than many combo loans.
One type of​ mortgage insurance,​ called single premium,​ lets buyers borrow the​ full amount needed,​ with no added monthly fees because the​ one-time premium is​ financed within one loan .​
And if​ the​ value of​ the​ home appreciates enough to​ cancel the​ insurance within the​ first five years,​ buyers receive a​ partial refund .​
In today's real estate environment,​ mortgage insurance sometimes cancels in​ as​ little as​ two to​ three years.
Compare the​ savings on​ a​ single premium loan to​ a​ piggyback mortgage on​ a​ $175,​000 home purchased with a​ 5 percent down payment.
The single premium loan has a​ $1,​076 monthly payment,​ while the​ piggyback is​ $1,​142 per month .​
If the​ mortgage insurance were canceled after three years,​ the​ single premium loan holder would receive a​ one-time refund of​ $1,​630.
Said Kevin Schneider of​ Genworth Financial,​ Inc.,​ With single premium products,​ monthly payments are among the​ lowest,​ and homeowners have peace of​ mind knowing that payments will not fluctuate.

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