What is Mortgage Insurance and is it Necessary?

There is much speculation that surrounds the need for mortgage insurance and in the end the only thing that this is benefitting is the lender.  If you not able to put a down payment of 20% of the house value than more times than not a lender will make this a mandatory purchase for the borrower to protect the lender from a non payment.  Unfortunately the borrower is the one that winds up paying for this every month and is getting nothing in return but protecting the already wealthy bank.  This is a bit ironic but this is the way it works for lenders to ensure that they are going to get their money back.

In the end the benefits that do come to the lender and borrower are that this will allow lenders to make loans that would other times be considered high risk.  Ensuring the payment is going to be made every month and with insurance to back it up can get you into a house that would otherwise not be possible.  This is one of the few things that this insurance can actually do for the borrower.

This is not required unless the mentioned above issues come into play.  There are ways to get around this insurance such as piggyback loans, larger down payments, and getting your loan under 80% of the house’s estimated value.  This can be good because you are not going to be paying this insurance cost for the life of the loan.