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Why do I need to pay an insurance premium? |
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You pay a mortgage loan insurance premium when you put less than 20% of the property value as a down payment. From the lender’s standpoint, if you put less than 20% down, you’re not as invested in the property than you would be if you put 30% or 40% down. Therefore, in the lender’s eyes, a client who puts less money down initially is more likely to default than someone who puts a lot of money down. The insurance premium that you pay on your mortgage is insurance for the lender in the event of your default – it protects them so that when the time comes to pay back their investors, they have the funds to do so.
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