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The Difference Between Homeowners Insurance and Mortgage Insurance

Posted on 2023-04-13 17:06:10 by iNF
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The Difference Between Homeowners Insurance and Mortgage Insurance

When you purchase a property, you have to navigate through numerous financial and legal transactions that involve you as a buyer, seller, or borrower. One such obligation that homeowners and homebuyers often come across is called homeowners insurance, and in some cases, mortgage insurance. It's not uncommon to mistake both insurance policies as being the same. But is there a difference? And if so, what makes them different?

Homeowners Insurance

Homeowners insurance is a type of property insurance that protects your home and your personal belongings from natural hazards or human-caused damage, such as a fire, theft, vandalism, or storm damage. It's not only recommended but often mandatory for homeowners who have a mortgage on their property to purchase this type of insurance.

Mortgage Insurance

Mortgage insurance is typically required when you buy a home with a down payment of less than 20% of the purchase price. The purpose of mortgage insurance is to protect the lender, not the borrower, in case of a default. Mortgage insurance is typically an additional monthly payment you'll need to make if your down payment is less than 20% of the purchase price of the property. The lender is the beneficiary of the mortgage insurance policy, and if you default on your mortgage, the insurance company pays the remaining balance on your loan to the lender.

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