Mortgage Insurance is required by lenders when you make less than 20 percent down payment. Private or Government mortgage insurance is obligatory in that case and serves to protect lenders from borrowers’ default on payments. The mortgage insurance may be a monthly premium, may be a lump sum paid upfront or a combination of the two. Sometimes the lender will buy the mortgage insurance and pay the premiums instead of the borrower which may result in a higher interest rate.
Hazard Insurance or homeowners insurance protects you and the lender from loss or damage to the property. It should cover at least the loan amount. Usually, the comprehensive hazard insurance policy will include general coverage for personal liability, personal property, some medical payments, perhaps even some expenses. Separate insurance policies may be required for natural disasters such as flood.
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Under federal law, mortgage insurance premiums are automatically terminated when the loan balance falls to 78% of the total property value, and may be terminated at the borrower’s initiative when the balance reaches 80% of the appreciated value. You will need to call your lender or servicer to inquire about specific policies for cancellation.