What is Mortgage Insurance?

Mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages. It's required primarily for borrowers making a down payment of less than 20%.  more

Mortgage Insurance insures lenders in the event of a borrower's foreclosure. It is paid for by the borrower, and allows lenders to grant loans that they otherwise would not consider. Depending on credit scores and loan structure, mortgage insurance may be required when the down payment is less than 20%.  more

If you downpayment or equity is less than twenty percent, you will be required to pay for mortgage insurance. Mortgage insurance insures the lender against default and foreclosure. If the borrower default on his or her payments and the property is foreclosed, the mortgage insurance company must repay the lender all or a portion of its losses. Do not confuse "mortgage insurance" with "mortgage life insurance". Mortgage life insurance is an optional life insurance policy that you can buy from your insurance agent. It pays off your mortgage in the event of your death.  more

Contrary to what many borrowers may think, Mortgage Insurance (MI) DOES NOT protect the borrower should they be unable to make mortgage repayments. Instead, (MI) protects the lender from any losses resulting in the sale of a property due to default by the borrower. (MI) premiums are payable by the borrower when the amount borrowed is above a certain percentage, usually 80% of the lender's valuation of the property. Some lenders will allow you to add the (MI) premium to your home loan whilst others require you to pay it up-front.  more

Private Mortgage Insurance protects the lender against loan default, and is usually required when a borrower has less than 20% for the down payment.  more

Private Mortgage Insurance is designed to protect the lender in case of default by the borrower(s). PMI is required when the loan is representative of more than 80% of the value of the home. In a purchase transaction, value is determined by appraisal or sales price which ever is lower. In a refinance, value is determined by the appraisal.  more

Mortgage Insurance is a type of insurance provided to protect the lender in the event of a loan default by the borrower. The premium is collected monthly as part of the mortgage payment and is generally required on loans where the borrower has less than 20% equity in the property.  more

Mortgage insurance protects the mortgage lender against loss in the event of default by the borrower. This allows lenders to make loans with lower down payments. On FHA loans this insurance is referred to as MIP (Mortgage Insurance Premium) and is required on all FHA loans. On Conventional loans this insurance is referred to as PMI (Private Mortgage Insurance) and is generally only required if the loan-to-value exceeds 80%.

As a loan officer who has over one thousand loan closings within the last five years, I have fielded numerous questions from first time home buyers, but the question most asked has to do with mortgage insurance: what is it, why do I have to have it, and how long do I have to keep paying it? Mortgage insurance is a financial guaranty for the lender that will help to reduce or eliminate a loss in the case of a default by the borrower, and it is almost universally required on loans where there is less than twenty percent equity. That means if you are purchasing a home with less than twenty percent down or refinancing to more than eighty percent of your homes value, you are going to be required to pay mortgage insurance. In other words, mortgage insurance spreads the risk between the lender and the insurance company. The next question I get about mortgage insurance is, “Why do I have to have it?” The answer to that is simple: without mortgage insurance, many lenders would not be able or ...  more

Mortgage insurance not to be confused with mortgage life insurance often is required by the lender to protect it against a loan default by the borrower who makes a low down payment (less than 20% of the sale price). If the borrower defaults, the mortgage insurer pays the lender its money and then seeks to recover from the borrower or forecloses on the property. The premium can be paid monthly or in one large payment. (As a corollary, make sure that your lender will cancel the insurance and/or refund unearned premiums if your home equity goes up or you sell the property.) Mortgage life insurance pays off the balance of your mortgage when you die.  more