Mortgage Insurance is a policy that helps to protect a lender. The Insurance is available if the borrower stops making any payments or defaults on their mortgage loan. You also have mortgage life insurance, but this is altogether different, this pays out only on the death of the borrower. When buying a home that has a down payment of less than 20%, a mortgage insurance policy is mandatory.

Mortgage Insurance is the same as any other Insurance, in that there is a premium to be paid. This premium is given to the lender, who will then add this cost to what the borrower owes. The amount of the premium is calculated at a percentage of the loan and is also affected by how much of a down payment is made. Say, for instance, there is less of a down payment, the premium will therefore be higher. Paying the premium is usually something that is included with the mortgage amount.

The main advantage of Mortgage Insurance is, those who borrow the money for a home will have a lower down payment. This allows access to many who would otherwise be disqualified for a mortgage loan.

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