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Homeowner Mortgage Insurance Explained
There are varieties of reasons someone may fail to meet their mortgage payment. It could because of the death of the main wage earner in the family, or an injury or disability in the family that will cause them to default on the mortgage payment. Homeowner mortgage insurance is a guarantee that will ensure the lender of the mortgage against the potential risks that the borrower may default on the mortgage.

Basically, when the lender has mortgage insurance, they are sharing their risk with the insurance company in case the borrower is unable to pay back the money that they are loaned. Many people confuse homeowner mortgage insurance with homeowner mortgage life insurance.

Homeowner mortgage life insurance is meant for the protection of the borrower. In this case, let's say that the main wage earner in the family meets with an untimely death. What happens is the rest of the family is stuck with making the mortgage payment, and most often will not be able to meet it. In order to avoid this from happening, mortgage life insurance is purchased. Here, the insurance policy will cover the amount of the mortgage in case the main wage earner passes on.

However, homeowner mortgage insurance can be beneficial for homebuyers. Mainly this is because when the insurance company assumes risk, the homeowner will be more likely to qualify for a loan for the mortgage. This means that you can become a homeowner sooner, and have more buying power for purchasing a home. In many cases, if you go with a lender who is knows you have mortgage insurance, you will be able to pay a smaller down payment on your first home.

And, if you become a repeat buyer, then you will even have to put less money down, and also you will enjoy different tax advantages because of the amount of deductible interest you can file on your taxes.

In very real terms, homeowner mortgage insurance can save you 10% on your down payment. If the lender does not have mortgage insurance, they will generally require you to make a 20% down payment on a home. However, when a lender is ensured, the down payment can be as little as 5%, or around 10% even. Unfortunately, you will probably have to pay more for the mortgage insurance through premiums and annuals.

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