What is Home Mortgage Insurance?
Mortgage insurance can refer to two types of insurance you may need to purchase when you purchase a home. The first type is usually voluntary and is a type of life insurance policy. If you are permanently disabled or die, this insurance policy kicks in to completely pay your mortgage, thus leaving you or survivors without the obligation of paying for a mortgage. The second type of mortgage insurance is much more common and may be called personal mortgage insurance (PMI) or lender’s mortgage insurance (LMI). Both PMI and LMI and usually non voluntary insurance fees are tacked onto the purchase of a home if you take out a very large loan, called a jumbo loan, or if you cannot place at least 20% down when you purchase a home. In the event that you cannot pay the loan, PMI protects both the lender and borrower. For instance, if the home loses value and the bank must foreclose on the mortgage, PMI steps in to protect the lender from owning money to the bank after the home is sold. In other
