What is Mortgage Insurance?
Mortgage insurance is insurance purchased by the borrower that insures the lender if you should default on the loan. Mortgage insurance is required for all loans where the LTV of the first mortgage is greater than 80%. This can be avoided by putting at least 20% down or combining a first and second mortgage.
What does it do and why do we need it? What kinds of benefit does it offer you? Mortgage insurance is there to provide the mortgage lender with protection should the borrower default on the loan. Mortgage insurance is very useful because it gives the lender and the borrower a level of security. When a borrower defaults on a loan the mortgagor will incur a loss because of this so mortgage insurance is there to cover that loss. This works out for the lender because they get to keep the title to your property and mortgage insurance protection. The borrower is the person who pays the premiums for mortgage insurance and he or she has a number of ways to pay for the mortgage insurance. Normally they can have the premiums attached to their monthly mortgage payments paid to the lender. The borrower benefits from mortgage insurance by having their investment protected form those unforeseen disasters that can occur at any time. Also if the borrower does not have enough money to make the 20% down
Mortgage Insurance does not cover the real property but rather the Mortgage Note. It comes under the category of Contract Performance Insurance and is in the Property and Casualty line. The term “private mortgage insurance” differentiates it from government insurance. Loan products such as FHA, VA and USDA Rural Housing loans also carry insurance but it is from the government and is built into the cost of the loan, rather than being purchased seperately.
