How Do Private Mortgage Insurance and Mortgage Life Insurance Compare?
In terms of real estate, when we talk generally of “private mortgage insurance” or MI what we mean is a situation where insurance is used to secure financing when a 20-percent down payment is not available. In other words, the insurance is there in lieu of cash from a borrower. If the property is foreclosed, the insurance will protect the lender against losses.
“Mortgage life insurance” is a different product. It will pay off the remaining loan balance to the lender or owner (usually the former) if a borrower dies for reasons covered by the policy. This type of insurance may not be available because of an existing health condition, and — unlike private mortgage insurance — you do not need it to obtain financing. Also, be aware that mortgage life insurance pays out less and less over time because the loan balance falls with each payment.
For details regarding insurance generally, contact a local insurance broker. For more about private mortgage insurance, go to PrivateMI.com.
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