What is mortgage insurance?
Mortgage insurance is a financial guarantee for the lender that helps to reduce or eliminate a loss in the case of a default by the borrower, and it is almost universally required on loans where there is less than twenty percent equity.
Mortgage insurance is basically a protection for the lender. When somebody plans to buy a home, and is unable to pay a huge amount as down payment which is 20% of the whole amount according to rule, it is the mortgage insurance that brings the lender to a safer side. Hence the buyer pays off the rest of the amount in Equated Monthly Installments (EMIs).
This type of specialized mortgage life insurance is of two types, Private Mortgage Insurance which generally, covers a substantial portion of the capital borrowed. Mortgage Insurance Premium protects the lender in the event of non-payment due to some unfortunate event.
Mortgage insurance may seem to be an unnecessary monthly cost to many first time home buyers, but it is in fact what allows most people to purchase their first home. With the law that allows homeowners to write this cost off their taxes, it has become a little more consumer friendly as well.
The mortgage insurance is a special type of insurance policy that is gaining huge popularity in the Indian mortgage industry. Some of the major mortgage financing industries in India include LIC Housing Finance, HDFC, ICICI Home Finance, SBI Housing Finance, UCO Bank, Allahabad Bank, United Bank of India, Kotak Mahindra Bank, Citi Bank, Standard Bank, HSBC
The Mortgage insurance eradicates all the worries of the lender. In other words, mortgage insurance spreads the risk between the lender and the insurance company. In this case both buyer and the lender come to the safer position because the buyer can give away the rest amount in the form of easy monthly installments and the risk of the lender is also covered.