All About Mortgage Insurance
Mortgage Insurance is an insurance policy which is offered to a mortgage lender. If not the mortgage lender, a title holder of the mortgage otherwise. Mortgage insurance works for the mortgage lender in case of death of the mortgage borrower or in case of default by the mortgage borrower or if the mortgage borrower is unable to meet the contractual obligations of the mortgage. Mortgage insurances had been in the late eighteen hundreds in the USA and took place with the real estate booms in the nineteen hundreds. The mortgage insurance can be either availed as a pay as you go basis or it can be availed by the payment of a lump sum amount at the beginning of the mortgage.
Private Mortgage Insurance
Mortgage insurance is mandatory for the lenders who have given out mortgages with down payment less than 20% of the total purchase value. So, it is transparent that the cost of the mortgage insurance shall also be included in the mortgage borrowers cost hence making the less than 20% down payment mortgages costlier. This type of mortgage insurance is known as private mortgage insurance where the mortgage is not backed by the government. Private mortgage insurances are the most opted ones among all of the mortgage insurances. The private mortgage insurance premiums lie between 0.3% to 1.2% per year, of the total principal amount insured. The range of rates may vary depending upon the borrower and many other factors that indicate the risk involved in the mortgage.
With the popularity of private mortgage insurance, Borrowers Private Mortgage Insurance was introduced. As it literally means, BPMI is the mortgage insurance that a borrower can obtain for his mortgage. If seen from the blanket point of view, you can perceive that with the help of BPMI, borrowers are able to obtain mortgages even though they might pay in less than 20% of the purchase price as the down payment. But an important thing to know about private mortgage insurance is that in any case, the mortgage insurance protects the lenders and not the borrowers, and the cost of the insurance premiums, be it yearly or monthly, shall be included in the interest payment of the mortgage.