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Mortgage Insurance Premium

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Mortgage Insurance Premium
 
A Mortgage Rate Premium (MIP) is a payment made on an insurance policy taken out to protect your Lender in the event you default on your mortgage payments.

Mortgage Insurance is typically required when you have a first trust deed loan amount that exceeds 80% of your home's equity.

This mortgage insurance policy does not protect you in any way. It protects the Lender. One way to avoid paying MIP is to take out a first loan that is 80% of your home's equity and then getting a second trust deed for the amount exceeding 80% (Sometimes called a piggy back loan). The interest rate charged on the second trust deed will be higher than the rate charged on the first mortgage.

MIP insurance premiums can not be itemized when calculating your Income tax liability.

The interest payment made on the second loan may be tax deductible. The tax savings on the combination of loans may save you money over paying for Mortgage Insurance.

Ask your Tax Advisor and Lender to see if this is an option for you.