Mortgage insurance is a type of insurance that protects the lender if a borrower defaults on their mortgage loan. It’s particularly common when borrowers make a down payment that’s less than 20% of the home’s purchase price. Because a smaller down payment means the lender is taking on more risk, mortgage insurance acts as a safety net, compensating them for potential losses if the borrower fails to make their payments.
There are primarily two types of mortgage insurance: Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP). PMI is typically associated with conventional loans, while MIP is associated with FHA loans. The key difference lies in how they’re administered and when they can be cancelled.
Private Mortgage Insurance (PMI): Lenders usually require PMI when a borrower’s down payment is less than 20% on a conventional loan. PMI is typically paid monthly as part of your mortgage payment. The cost is usually a percentage of the loan amount, ranging from roughly 0.5% to 1% annually. Good news is, PMI can often be canceled once the borrower has reached 20-22% equity in the home, either through making payments or through property appreciation. Homeowners can request cancellation of PMI when their loan-to-value (LTV) ratio reaches 80%, and lenders are generally required to automatically cancel PMI when the LTV reaches 78%, provided the borrower is current on their payments.
Mortgage Insurance Premium (MIP): This is required for most FHA loans. MIP has two components: an upfront premium paid at closing, and an annual premium paid monthly as part of your mortgage payment. The upfront premium is usually a percentage of the loan amount and can often be rolled into the loan. The annual premium is also a percentage of the loan amount and is divided into 12 monthly installments. The duration of MIP depends on the loan-to-value ratio and the loan term. For many FHA loans originated after 2013, MIP is required for the life of the loan if the initial loan-to-value ratio was higher than 90%. However, for some FHA loans with lower LTV ratios, MIP may be cancelled after 11 years.
While mortgage insurance protects the lender, it ultimately benefits the borrower as well. It makes homeownership more accessible to individuals who might not have a large down payment. Without mortgage insurance, many people would be unable to qualify for a mortgage loan. By enabling more people to purchase homes, it contributes to a more robust housing market.
It’s crucial to understand the terms and conditions of your mortgage insurance policy. This includes the cost, how long you’ll be paying it, and the requirements for cancellation. Knowing these details can help you plan your finances effectively and work towards eliminating the added expense of mortgage insurance as soon as possible.
768×576 mortgage insurance financegovcapital from finance.gov.capital 
1050×1400 mortgage insurance safeguard insurance financial services from safeguard-ltd.com 
1920×483 finance insurance automobile distributor singapore auto midas from www.automidas.com.sg 
1536×2048 learn mortgage insurance astoria wealth management from astoriawealth.com 
768×349 mortgage insurance singapore compare decide from blog.moneysmart.sg 
1200×549 mortgage insurance work pnc insights from www.pnc.com 
400×400 mortgage insurance singapore from dollarbackmortgage.com 
1038×576 mortgage insurance florida agency network from flagency.net 
1920×1080 mortgage insurance quotes insurance tips from insureye.com 
730×350 mortgage insurance singapore competitive mortgage insurance from www.insuranceempire.sg 
1000×667 mortgage insurance premium mip total mortgage blog from www.totalmortgage.com 
800×533 mortgage insurance guide kc mortgage guy kansas city mortgage lender from www.kcmortgageguy.com -Step-9-Version-2.jpg)
3200×2400 calculate mortgage insurance pmi steps pictures from www.wikihow.com 
1420×1092 group mortgage insurance ocbc singapore from www.ocbc.com 
1200×800 mortgage protection insurance affiliated home from www.affiliatedhomes.com 
750×393 mortgage insurance article from www.oneinsure.com 
2240×1260 mortgage insurance buy mortagae insurance singapore from apacrelocation.com 
960×640 mortgage insurance avoid regrets life from www.redbrick.sg 
765×426 mortgage insurance singapore ultimate guide from smartwealth.sg 
601×221 compare affordable mortgage insurance plans moneysmart from www.moneysmart.sg 
1200×800 mortgage insurance avoid parent portfolio from parentportfolio.com 
1024×768 mortgage insurance from ironandpearlfinancial.ca 
940×788 mortgage insurance term insurance singapore moneylinesg from www.moneyline.sg 
707×391 mortgage insurance singapore choose level term moneylinesg from moneyline.sg 
1200×899 mortgage insurance homeowners from www.99.co 
2240×1260 mortgage insurance policy benefits mortgage insurance from apacrelocation.com 
2560×1707 mortgage insurance guide singapore mortgage insurance from apacrelocation.com 
1200×628 mortgage insurance singapore comparison from smartwealth.sg 