Mortgage insurance

[priyanka1987]

Hello all......



Mortgage Life Insurance refers to an insurance policy that guarantees repayment of a mortgage loan in the event of death or, possibly, disability of the mortgagor. Private Mortgage Insurance (PMI) refers to protection for the lender in the event of default, usually covering a portion of the amount borrowed. There are Government loan products that also include a Mortgage Insurance Premium (MIP), essentially the government equivalent of PMI.

For example, Mr. Smith obtains a mortgage loan that exceeds 80% of his property's value and/or sale price. Because of his limited equity, the lender requires that Mr. Smith pay for mortgage insurance that protects their institution against his default. To obtain a mortgage loan insured by the Federal Housing Administration, Mr. Smith must pay a mortgage insurance premium (MIP) equal to 1.5 percent of the loan amount at closing. This premium is normally 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 premium as well.


any one has any info relating to this thn post in this tread...........

 

[priyanka1987]

Types of Mortgage Insurance




Private Mortgage Insurance (PMI) is default insurance on mortgage loans, provided by private insurance companies. PMI allows borrowers to obtain a mortgage without having to provide 20% down payment, by covering the lender for the added 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 certain level, particularly when the loan balance is 78 percent of the home's purchase price. Often, PMI can be cancelled earlier by submitting a new appraisal showing that the loan balance is less than 80% of the home's value due to appreciation (this generally requires two years of on-time payments first) Different terms:Mortgagee's Title Insurance is a policy that protects the lender from future claims to ownership of the mortgaged property. Generally required by the lender as a condition of making a mortgage. In the event of a successful ownership claim from someone other than the mortgagor, the insurance company compensates the lender for any consequent losses. Mortgagor's Title Insurance is a policy protecting the buyer/ owner of real property from successful claims of ownership interest to the property. The coverage usually is supplemental to a Mortgagee's Title Insurance policy, and the premium is customarily paid by the buyer.

 

[priyanka1987]

Meaning of Mortgage Insurance:



Simply insurance that protects the lender if in any case the homebuyer does not make their respective mortgage payments is called as mortgage insurance. It can be defined as a financial guaranty that protects the lenders against the loss. In any case if the borrower is found to be defaulted and the lender takes the title of the property then the mortgage insurer reduces the loss to the lender. More over in case of mortgage insurance, the insurer haves some risk by lending money.

 

[priyanka1987]

Payment Structure In Mortgage Insurance:



In case of the mortgage insurances, an initial premium is collected at closing and depending on the premium plan; a monthly amount may be included in the house payment made to the lender. The general types of the premium plans in case of the mortgage insurances are as follows:


For the Annuals the borrower pays the first year premiums at a closing.
In case of the monthly premiums, the cost burden is more than the traditional mortgage insurance plans. In Singles borrower pays the one time single premium.




Private Mortgage Insurance (PMI)



The private mortgage insurance deals only when down payment on a home is less than 20% of the sale price. This enables for getting a mortgage with lower down payment as the lender is protected from the default on the loan.

The rates on the private mortgages vary depending upon the size of down payment and the loan. Mortgage insurance premiums are generally tax deductible.