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Types of Mortgage Insurance
Private Mortgage Insurance (PMI) is default insurance on mortgage loans,
provided by private insurance companies. PMI allows borrowers to obtain a
mortgage without having to provide 20% down payment, by covering the lender for
the added risk of a high loan-to-value (LTV) mortgage. The Homeowners Protection
Act of 1998 requires PMI to be canceled when the amount owed reaches a certain
level, particularly when the loan balance is 78 percent of the home's purchase
price. Often, PMI can be cancelled earlier by submitting a new appraisal showing
that the loan balance is less than 80% of the home's value due to appreciation
(this generally requires two years of on-time payments first) Different
terms:Mortgagee's Title Insurance is a policy that protects the lender from
future claims to ownership of the mortgaged property. Generally required by the
lender as a condition of making a mortgage. In the event of a successful
ownership claim from someone other than the mortgagor, the insurance company
compensates the lender for any consequent losses. Mortgagor's Title Insurance is
a policy protecting the buyer/ owner of real property from successful claims of
ownership interest to the property. The coverage usually is supplemental to a
Mortgagee's Title Insurance policy, and the premium is customarily paid by the
buyer.