Trying to find out more about Mortgage Insurance? You aren't alone! This can often be one of the most confusing financial products on the market, so we've decided to try and simplify it with our brief guide.
Mortgage Insurance is an insurance policy taken out to protect lenders and financial institutions against losses incurred due to the default of a mortgage loan.
The reason you've probably been hearing more about Mortgage Protection Insurance is due to the downturn in the economy as lenders seek to secure their investments more than ever before.
Gone are the days of reckless lending to people who, ultimately, can't afford the repayments! Banks are FAR more conservative now, and MPI reflects this.
It comes in two forms, Borrower Paid Private Mortgage Insurance, and Lender Paid Mortgage Insurance. Let's break down those terms.
Borrower Paid Private Mortgage Insurance - This is the "traditional mortgage insurance" provided by the private insurance company and paid for by borrowers. It helps to allow borrowers to obtain a mortgage even if they don't have access to a 20% down payment.
Lender Paid Mortgage Insurance - This type of insurance is similar to the one above, except for the fact it is paid for by the lender, and the borrower is often completely unaware of its existence. The cost of the premium is built into the interest rate charged on the loan.
Rates on Private Mortgage Insurance can vary from 1.5% to 6%, so, as with all financial products, doing your homework will prove massively beneficial in the long run!