Mortgage Insurance

What is mortgage insurance?

Mortgage insurance protects a lender if the borrower were to default on the mortgage. Mortgage insurance is collected each month by the lender to cover the risk undertaken by the lender. Mortgage insurance allows families or individuals to purchase a home with little or no downpayment.

Mortgage insurance is calculated on the principal amount and its loan-to-value of the home. A mortgage that is more than 80 percent LTV requires mortgage insurance. On government insured mortgages, LTV is 78 percent. After the proper LTV's are met, the borrower may then cancel mortgage insurance payments.

"Tip"

Having a first mortgage of 80 percent LTV and a second mortgage up to 20 percent LTV eliminates the need for mortgage insurance.