Buying a home can be very stressful, so it’s not surprising that some people would confuse mortgage insurance with homeowners insurance. The two are very different.
Mortgage insurance is usually purchased by the borrower, on behalf of the lender, to protect the lender against the borrower defaulting on a mortgage. It is also known as private mortgage insurance, or PMI, and is generally required if the borrower puts down less than 20% on their down payment. The borrower can get a second mortgage and avoid PMI but if he or she gets a loan for 80%+ then a lender will require it. PMI recently was made tax deductible.
Homeowners insurance, which is what this site is about, covers the borrower in the event of damage or loss in their home. If your house burns down, homeowners insurance protects you. If someone breaks into your house and steals something, homeowners insurance protects you.
Hpefully the difference is clearer now.
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