 Sam
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 Posted: Thu Apr 08, 2004 1:33 am Post subject: Mortgage Insurance Premiums |
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Mortgage Insurance Premium refers to a monthly payment made by a borrower for mortgage insurance policy. This kind of an insurance policy protects lenders against any loss that occurs when a borrower defaults on the mortgage payments. Mostly borrowers with a down payment of less than 20% of the home value require purchasing this policy.
The FHA requires buyers to pay mortgage insurance premiums. An initial premium is charged at closing and the monthly premiums are included within the monthly loan payments. The lender collects these payments and sends them to the insurer.
Not all lenders charge the premium at closing. It depends on the type of property against which the mortgage is taken. In FHA-insured mortgages, the premium at closing is often financed into the loan amount. Private lenders in the market also require borrowers to purchase mortgage insurance known as PMI or Private Mortgage Insurance. But they demand lower premiums and insure loans which often exceed the FHA limit.
Often insurers allow for refundable premiums. Such premiums give the chance to receive money back on any unutilized portion if the insurance coverage is discontinued prior to paying off the loans. The cost for a policy with a refundable premium is slightly higher than on a policy with a non-refundable premium.
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