Real Estate Investing Information Blog

Mortgage Life Insurance refers to an insurance policy that guarantees settlement of a mortgage loan in the event of death or, possibly, disability of the mortgagor. Private Mortgage Insurance or PMI refers to safety for the lender in the event of default, generally covering a portion of the amount borrowed. There are Government loan products that also contain a Mortgage Insurance Premium or MIP.

For example, Mr. Smith obtains a mortgage loan that exceeds 80% of his property's price and/or sale price. Because of his limited equity, the lender requires that Mr. Smith pay for mortgage insurance that protects their institution next to his default. To gain a mortgage loan insured by the Federal Housing Administration, Mr. Smith must disburse a mortgage insurance premium (MIP) equal to 1.5 percent of the loan amount at closing. This premium is usually financed by the lender and paid to FHA on the borrower's behalf. Depending on the loan-to-value ratio, there may be a monthly finest as well.

Private Mortgage Insurance (PMI) is default insurance on mortgage loans, provided by personal insurance companies. PMI allows borrowers to obtain a mortgage without having to supply 20% down payment, by covering the lender for the extra risk of a high loan-to-value (LTV) mortgage. The Homeowners Protection Act of 1998 requires PMI to be canceled when the amount owed reaches a positive level, particularly when the loan balance is 78% of the home's purchase cost. Often, PMI can be cancelled previous by submitting a new evaluation showing that the loan balance is less than 80% of the home's value due to appreciation Different terms: Mortgagee's Title Insurance is a strategy that protects the lender from future claims to rights of the mortgaged property. Usually required by the lender as a state of making a mortgage. In the event of a victorious ownership assert from someone other than the mortgagor, the insurance company compensates the lender for any resulting losses. Mortgagor's Title Insurance is a policy defending the buyer/owner of real property from successful claims of ownership attention to the property. The coverage generally is supplemental to a Mortgagee's Title Insurance policy, and the premium is usually paid by the buyer.