Before buying an automobile on a complete loan there are certain things you should consider, things like; what if I got involved in an accident and this automobile got destroyed, will I be able to pay the dealer his money?, What if I failed to pay the dealer his money?.
To solve this problem of uncertainty, you need mortgage insurance.
what is mortgage insurance
Mortgage insurance is the portion of your monthly loan payment that goes to the lender to protect them in the event of a default on the loan.
Mortgage insurance doesn’t protect you in anyway, it protects the lender in case you stop making your loan payments https://howtodiscuss.com/t/payment/15385. for some reasons. It ensures that your lender gets paid. It protects the lender’s loan.
Summary
Mortgage insurance is the portion of your monthly loan payment that goes to the lender to protect them in the event of a default on the loan.
Why mortgage insurance
The reason why lenders https://howtodiscuss.com/t/lender/7395. wants mortgage insurance is to ensure that they get their loan back in case something happened and you couldn’t make the payment.
What are the modalities for mortgage insurance
How much you pay monthly on mortgage insurance is dependent on your premium https://howtodiscuss.com/t/insurance-premium/11844. Your premium is the probability of something going wrong. The higher this probability (premium) the higher the percentage will pay monthly or annually and if you have a high credit https://howtodiscuss.com/t/credit/6710. the percentage How to Calculate Percentage. you’ll pay monthly I likely to be higher
Summary
How much you pay monthly on mortgage insurance is dependent on your premium.
Types of mortgage insurance
- conventional loan
- FHA loan
3)VA loan https://howtodiscuss.com/t/va-loan/15236.
Conventional loan
This is private mortgage insurance https://howtodiscuss.com/t/private-mortgage-insurance-pmi/8398. ( PMI) In conventional loan mortgage insurance, if you put down 20% on the loan then you don’t have to worry about mortgage insurance anymore, but you put down anything less then you’re going to have mortgage https://howtodiscuss.com/t/junior-mortgage/15888. insurance. Here the lesser the amount you put down on the loan the higher the amount you are going to have to
https://howtodiscuss.com/t/open-mortgage/9191. pay on the mortgage insurance. For example someone who put down 5% of his loan will have a higher mortgage than someone who put down 10% or 15% .
Summary
In conventional loan, the less the amount you put down the higher the amount you’ll have to pay on mortgage.
VA loan
This is government mortgage https://howtodiscuss.com/t/government-national-mortgage-association-gnma/13665. insurance. In this type of mortgage insurance What is mortgage insurance?, you’re required to pay just one time upfront fee after that you don’t have to be making any monthly payment on the mortgage again.
FHA loan
This is also a government https://howtodiscuss.com/t/government/6712. mortgage insurance. In this type of mortgage insurance, you’re required to pay for the mortgage https://howtodiscuss.com/t/mortgage/10125. insurance What is life insurance? A Complete Guide For Beginners. for the whole duration of the loan. For example, if you have a loan for 5yrs FHA stays with you for 5yrs, the only way to get rid of it is to get rid of the loan https://howtodiscuss.com/t/loan/11885.
Frequently asked questions
Why do lenders insist on getting mortgage?
Lenders insist on you getting mortgage insurance because they don’t want to risk loosing their money in case something happens and you couldn’t make the loan payment.
What is my insurance premium
Your insurance premium is the probability of something going wrong, the higher this probability, the higher the amount you’ll pay with your insurance company.
conclusion
Mortgage insurance is a portion of your monthly loan payment that goes to the lender to protect them in the event of a default on the loan.
Mortgage insurance doesn’t cover you in anyway, it covers the lender in case you couldn’t make the loan payment for any reason.