- Lender-paid mortgage insurance is not actually lender-paid. This is because a mortgage that requires insurance whose borrowers choose lender-paid mortgage insurance will have higher interest than one without lender-paid mortgage insurance.
- The higher interest rate is either fixed at a high level for the duration of the loan, or it decreases until the borrower has 20 percent equity, which acts as insurance in and of itself by creating incentive for the borrower to continue making payments.
- Mortgage insurance is generally required on a loan for which the loan-to-value ratio is greater than 80 percent. Put another way, it is a loan for which the borrower has not put provided the typical 20 percent down payment. The reason it is used is because a borrower is more inclined to walk away from a house with less equity.
Payment
Payment Amounts
Risk Management
SHARE