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.
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:
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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.
Mortgage Insurance Companies Of America (MICA)
Six Private Mortgage Insurers comprise MICA'S membership, which are as follows;
- Genworth Financial, Inc.
- Mortgage Guaranty Insurance Corp.
- PMI Mortgage Insurance Company.
- Republic Mortgage Insurance Company
- Triad Guaranty Insurance Corporation.
- United Guaranty Corporation.