What, exactly, is a lenders mortgage insurance?
A lenders mortgage insurance, which is also called a private mortgage insurance (PMI), is an insurance product that protects a lender (such as a bank) or a trustee for the loan or mortgage it releases.
In the event that the borrower is unable to pay the bank and defaults on the mortgage, the lenders mortgage insurance will kick in to pay for the deficiency in the mortgage. By deficiency we mean the unpaid balance of the debt, after the foreclosure and sale of the property that was mortgaged.
If you want to apply for a mortgage loan, the bank will usually require you to buy lenders mortgage insurance. People consider this insurance an unnecessary expense and will try to get rid of this as soon as they can. However, if you want to buy a house but cannot afford the requisite 20% down payment of its value, you will need to get lender's mortgage insurance. Once your equity or loan to value percentage reaches the required level (currently at 80%), you can request your lender to cancel the coverage.
The borrower is the one that will be paying the lenders mortgage insurance. The payments are either made on a monthly basis or paid up front. The premium is mostly based on the total loan value, as well as on the type of the loan, the proportion of the home value that is being financed, and the length of the term of the loan.
Lenders mortgage insurance is different from mortgage protection insurance. Mortgage protection insurance protects the interest of the buyer of the property and helps to make sure that he does not foreclose on the house because of the one paying for the mortgage dies, becomes disabled or unemployed.
As per the most recent law, homeowners can enjoy tax deductions on their mortgage insurance. This, in effect, makes it cheaper for the buyer to get mortgage insurance instead of getting a "piggyback loan".
| Not a bit | Very useful |
- What does title insurance underwriter do?
- What is commercial land title insurance?
- Where can I get title insurance quote?
- At what instances should I get extended coverage on title insurance?
- Is there a way for me to save on my title insurance fees?
- How to become a title insurance agent?
- Will home owner title insurance pay for liens made by the contractor of my house?
- Will title insurance protect me against false claims that arose after I purchased the property?
- Who pays for the title insurance in commercial transactions?
- Do I need extended title insurance coverage for bare land?
- Do I need an attorney for a warranty deed with title insurance?
- How much is title insurance?
- Who pays for title insurance on the short sale of a home in Florida?
- Who pays for owners title insurance?
- Is my real estate purchase protected with title insurance?
- What is owner’s title insurance and how is it different from lender’s title insurance?
- What is mortgage title insurance?
- What is a reissue rate on title insurance and how is this rate different from the typical rates for title insurance?
- What is a title insurance policy and what can it do for me?
- How to calculate title insurance?