What Is Mortgage Insurance?

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Mortgage insurance is designed to protect the policy holder in the event of a very specific situation. Learn about mortgage insurance with help from a professional financial adviser in this free video clip.

Part of the Video Series: Insurance & Personal Finance FAQs
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Video Transcript

I'm Teresa Dentino, CEO and the founder of The Financial 411 in Woodside, California, we're going to talk about mortgage insurance. Mortgage insurance is really just an insurance policy that a lender may require of you, when you take out a home loan. When you put down 20 percent, the lender is loaning you the other 80 percent. When your down payment doesn't equal 20 percent, the lender is actually taking on more risk. In that case, the lender may require mortgage insurance. The cost of the insurance is about one-half of one percent. And there are two ways that you may see this cost applied to your loan. In some cases, the lender may purchase the insurance and pass the cost along to you in the form of a higher interest rate on your loan. Probably, the most familiar method is that the individual purchases the mortgage insurance, and pays an extra amount every month in their monthly mortgage payment. Mortgage insurance isn't something that you have to actually go and shop for yourself. At the time of the application, the bank will let you know, whether you will have an extra charge in your mortgage payment or mortgage insurance. This is Teresa Dentino, CEO and the founder of The Financial 411 in Woodside, California.

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