Most home loans without at least 20% down payment require mortgage insurance. While it is usually paid by the homeowner, it doesn’t provide them any coverage. Put simply, the role of mortgage insurance is to protect the person who purchases the loan on a secondary market—in case the loan goes on default. Like other loans, there are different types of insurance, but the most common are Mortgage Insurance Premiums (or MIP) and Private Mortgage Insurance (or PMI).
What’s the difference between MIP and PMI?
Here are the main differences between these two types of mortgage insurance:
Which Option Is More Expensive?
Since several factors affect the costs of MIP and PMI and the factors tend to vary on an individual basis, the best way to estimate the cost of MIP versus PMI is to consult a mortgage professional. Most mortgage insurance advisors are always ready to answer any question about MIP and PMI as well as home loans that go with them.
Insurance is known to replace the unknown with security for investors. For homeowners and homebuyers, on the other hand, the best bet is to get a mortgage that meets your needs and financial goals. Hopefully, the above tips have shed some light on the basics of what MIP and PIM entail.