Mortgage insurance is one of those things that most people know exists, but few people actually know what it is or how it works. In a nutshell, mortgage insurance is insurance that protects the lender in the event that the borrower defaults on their home loan. It’s important to note that not all borrowers are required to have mortgage insurance. It typically depends on the type of loan you have and the down payment you make. For example, conventional loans usually require private mortgage insurance (PMI) if you put down less than 20%. In this blog post, we will explore how do you know if you have mortgage insurance and what it covers. We will also touch on some of the pros and cons of having this type of insurance.
What is Mortgage Insurance?
Mortgage insurance is a type of insurance that protects lenders against losses resulting from borrower default. Mortgage insurance can be either private or public, and is often required when a borrower makes a down payment of less than 20% of the home’s purchase price.
Mortgage insurance typically costs 0.5% to 1% of the loan amount per year, and is usually paid monthly along with the mortgage payment. Borrowers who default on their loans are responsible for paying any remaining balance on the loan, as well as any outstanding mortgage insurance premiums.
The Different Types of Mortgage Insurance
While there are a few different types of mortgage insurance, they all essentially work the same way. Mortgage insurance protects the lender in the event that you default on your loan. If you have mortgage insurance, it will typically be required by your lender if you put less than 20% down on your home.
There are two main types of mortgage insurance: private mortgage insurance (PMI) and mortgage insurance premium (MIP). PMI is typically required if you have a conventional loan and put less than 20% down on your home. MIP is required if you have an FHA loan regardless of how much money you put down.
Mortgage insurance is something that is typically required by lenders in order to protect them in the event that borrowers default on their loans. There are two main types of mortgage insurance- private mortgage insurance (PMI) and mortgage insurance premium (MIP).
PMI is usually required when borrowers take out a conventional loan and they putting less than 20% down as a down payment for their home. MIP is often times required when borrowers take out an FHA loan, no matter how big or small the down payment for their home may be.
Monthly payments for both PMI and MIP can sometimes be added into the overall monthly payment for the loan, or they could be paid separately each month.
How to Know If You Have Mortgage Insurance
If you’re not sure if you have mortgage insurance, there are a few things you can do to find out. First, check with your mortgage company or loan servicer. They should be able to tell you if you have mortgage insurance and how much coverage you have.
You can also look at your mortgage statement or loan documents. Mortgage insurance is typically required if you put less than 20% down when you bought your home. If you see an insurance premium on your statement, that’s a good indication that you have mortgage insurance.
Finally, check your credit report. Mortgage insurers typically report the status of your policy to the credit bureaus. If you see an entry for mortgage insurance on your report, that means you have it.
Pros and Cons of Mortgage Insurance
Mortgage insurance is a type of insurance that protects lenders from losing money if borrowers default on their home loans. It is required by most lenders when borrowers make a down payment of less than 20 percent of the home’s purchase price.
There are both pros and cons to having mortgage insurance. Some of the pros include:
-It allows borrowers to purchase a home with a smaller down payment
-It protects lenders in case of borrower default
-It can help borrowers get lower interest rates
Some of the cons of mortgage insurance include:
-It can be expensive, often costing as much as 1% of the loan amount each year
-Borrowers are required to pay for it even if they never use it
-It doesn’t protect borrowers, only lenders
How Much Does Mortgage Insurance Cost?
Mortgage insurance typically costs 0.5% to 1% of the entire loan amount on an annual basis. This means that on a $200,000 loan you could be paying as much as $2,000 a year – or $167 per month – in mortgage insurance. The amount you pay will depend on your loan amount, term length, and lender.
How to Get Rid of Mortgage Insurance
Mortgage insurance is a pain, but you can get rid of it. Here’s how:
1. Check your mortgage statement or contact your lender to find out if you have mortgage insurance.
2. If you have mortgage insurance, check with your lender to see if you can cancel it.
3. If you can’t cancel it, try to refinance your loan and get rid of the mortgage insurance that way.
4. If all else fails, just wait it out and the mortgage insurance will eventually go away on its own.
Conclusion
If you’re not sure whether or not you have mortgage insurance, the best thing to do is to contact your lender and ask. They should be able to give you the information you need in order to make an informed decision about whether or not you want to keep the insurance. In some cases, it may be worth it to pay the premiums in order to have peace of mind, but in other cases it may be better to cancel the policy and save yourself some money each month.
