Any type of insurance is a promise of refund in case of any loss, which is covered under specific policy of the type of loss. The insurance companies pay the amount of the loss or damage to individuals or companies who have earlier terms with the insurance company, against some payments.
Mortgage is a method of using personal or real property as a security for paying any kind of debt. Mortgage Insurance is type of insurance policy which guarantees repayment of the mortgage loan in the case of death of the mortgagor or the disability of the mortgagor. Private Mortgage Insurance or PMI is referred as the protection for the leader in case of default, where usually a portion of the borrowed amount is covered. Government loan products are also there which include Mortgage Insurance Premium or MIP, which is essentially the government equivalent of Private Mortgage Insurance.
There are different types of Mortgage Insurance, which are described below:
Private Mortgage Insurance is default insurance on mortgage loans, which are provided by the private insurance companies. This policy allows the borrowers to obtain mortgage without the usual 20% down payment. The PMI is to be canceled according to The Homeowners protection Act of 1998, when the amount which is owed reaches a certain level; particularly in the case of the loan balance is 78% of the home's purchase price. It is also known as Lenders Mortgage Insurance, or LMI.
Mortgagee's Title Insurance is an insurance policy which protects the lender from future claims of ownership of the mortgaged property.
Mortgagor's Title Insurance is a policy which protects the buyer or owner of real property from successful claims of ownership interest to the property. This coverage is a supplement of the Mortgagee's Title Insurance Policy, where the premium is customarily paid by the buyer of the property.