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Facts about “Mortgage Insurance”
by Anonymous

July 16, 2004 -- The Essence of life lies in its complete cherishment till death…… Every person wants to enjoy life at its utmost. Increasing competitions among available products and rapidly fluctuating market rates have totally changed the present business scenario. Today every thing is very uncertain. Speaking in mortgage terms, today not only the borrowers but the lenders also, experience a state of dilemma in what ever mortgage dealing they are undertaking.

To overcome the challenges posed by gainless mortgage deals, a lender is provided with a security backup, in the form of mortgage insurance. Let’s have a brief look at mortgage insurance.

The idea behind mortgage insurance is simply that if something happens to a borrower then his/her loan will be paid off. Mortgage insurance protects the mortgage lender against financial loss if a borrower defaults.

The truth is that a borrower could probably get a much better deal and at least an equal amount of protection, by shopping around for his/her own insurance policy. Essentially, mortgage insurance is no different than term-life insurance.

Mortgage insurance refers to an insurance provided by a private company that protects the mortgage lender by paying the costs of foreclosing on a house, if the borrower stops paying the loan. The borrower usually pays the cost of the insurance. It is most often required, if the down payment is less than 20% of the sale price. It is also known as MI or PMI (for private mortgage insurance). It protects the lender, if the borrower stops paying the loan. Lenders typically require a down payment of at least 20 percent of the purchase price.

Mortgage insurance makes it possible for a homebuyer to obtain a mortgage with a down payment as low as 5% and for low-to-moderate income homebuyers as low as 3%. Mortgage insurance may be also required when buying a second home or refinancing an existing mortgage with cash out.

Mortgage insurance protects the mortgage lender against financial loss if a borrower defaults.

Mortgage insurance allows borrowers to purchase a more expensive home than they might otherwise be able to afford.

One of such type of mortgage insurance is the Mortgage Indemnity Guarantee. It is a one “off fee” that lender pays to an insurance company, if a borrower borrows a high percentage of the purchase value of his/her property.

Key features of mortgage indemnity guarantee are as following:
1. It acts as a form of mortgage insurance, only for the lender not the borrower.
2. It is a type of insurance that gives a protection cover to the mortgage lender.
3. This is an insurance premium charged by some lenders where a borrower’s loan to value ratio is greater than 75%.
4. It is charged in case a borrower defaults on his mortgage repayments and the mortgage lender cannot recover its money.

The bottom line is that mortgage insurance is important and should be part of borrower’s home buying or refinancing preparations.

If you have any other queries related to mortgage, feel free to visit this site. http://www.mortgagekb.com





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