Mortgage insurance therefore means an insurance policy that guarantees repayment of mortgage loan in the event of death or, possibly, disability of the mortgagor- the cost of mortgage insurance varies considerably based on various factors. It is in fact defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. The fee paid by the insured to the insurer for assuming the risk is called the premium. This premium is normally financed by the lender and paid to insurance company on the borrower’s behalf.
Depending on the loan-to-value ratio, there may be a monthly premium as well. Mortgage Company while processing the Best mortgage loan first ensures to arrange proper insurance of the property so that the lender in case of default is in a position to recover its costs after foreclosing the loan and selling the mortgaged property. The annual cost of insurance premium depends on the loan amount, type of loan, proportion of the total home value that is financed.
Mortgage insurance, is generally required by the lender as a pre condition of making a mortgage and provides indemnification against a loss or liability on account of unforeseen event or circumstances that may occur or be discovered during the duration of mortgage. The mortgage insurance is usually ranges between one to about half percent of the loan amount. There are two ways to get out of paying costly private mortgage insurance. One way is to agree to a higher interest rate.
The benefit to you is that mortgage interest is tax-deductible whereas private mortgage insurance is not. Insurance rate is a factor used to determine the premium amount, charged for a certain amount of insurance coverage is insurance payable to a lender that may be required when taking a loan. The Mortgage broker shall be in a better position to provide you with complete information relating to insurance aspect and under the situation it is quite advisable to explore this option as well if need arises or you are not satisfied with the mortgage offer.