What is Mortgage Insurance?
Welcome to Mortgage 101. We help home buyers and realtors understand home loans. You’re in the right place if you’re thinking of buying your first home, if you’re moving to your next home, or if you’re ready to refinance your existing loan.
Mortgage Insurance is a type of insurance policy that protects the lender in the event that the homeowner defaults on their home loan.
It is required when any one loan on the property exceeds 80% loan to value. This means that one loan would be for more than 80% of the value of the home.
There are many ways to structure mortgage insurance.
- Pay it monthly in your mortgage payment.
- Pay a single premium at settlement.
- Finance it over the term of the loan.
- Get multiple loans to avoid getting mortgage insurance all together.
How you decide to structure the payment of this policy is up to you. Each option will help you reach different goals or priorities. Talk to your mortgage advisor to learn how different options help you reach your goals.
How Does This Help Me?
According to the Consumer Financial Protection Bureau, “Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. “
So although this policy is in place to protect the lender, it may be an opportunity for a borrower to build their wealth with a loan they may not have available without it.
The good news is, once you have paid off a portion of the loan, you may be able to cancel the insurance.