contract insuring a mortgage lender against default risk. Mortgage insurance allows a borrower to purchase a home with a down payment as low as 3 to 5% of the purchase price-even lessfor qualified borrowers-instead of the usual 20% down paymentlenders normally require. Insurance premiums are paid by the borrower.The Federal Housing Authority, an agency in the Department of Housing and Urban Development, insures mortgages on one-to-fourfamily houses and condominiums, and it reimburses the mortgage lender if default occurs. Mortgage insurance purchased from a commercial insurance carrier is known as
insurance generally required by lenders of those who borrow more than 80%, generally up to 95% of a home's price. It will indemnify the lender in case of foreclosure of the loan. Indemnification is typically limited to losses suffered by the lender in the foreclosure process, up to 20% of the mortgage.
life insurance that pays the balance of a mortgage if the mortgagor (insured) dies. Coverage is usually in the form of decreasing term insurance, with the amount of coverage decreasing as the debt decreases.
a policy that guarantees repayment of a mortgage loan in the event of death or, possibly, disability of the mortgagor.
protection for the lender in the event of default, usually covering a portion of the amount borrowed.
Example: Manning obtains a mortgage loan and, for an additional monthly premium, purchases mortgage insurance. Should Manning die before loan maturity, the policy will pay the remaining balance of the loan. This protects Manning's survivors from losing the property because of inability to continue the loan payments, and also protects the mortgagee.
