Home Loan Insurance is Home Payoff Insurance

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Unlike PMI, Which only protects your lender, HPI, Home Payoff Insurance, often referred to as Mortgage Protection Insurance, or Home Loan Insurance is a life insurance policy purchased specifically to provide an insured mortgage payoff of your home in the event of the mortgage payors premature death. Often a disability rider, or disability income policy is also purchased to protect the ability to keep the mortgage current by providing a monthly income in the event of a disability caused by a sickness or accident.

Private mortgage insurance (PMI) is a type of mortgage insurance you might be required to buy if you take out a conventional loan with a down payment of less than 20 percent of the purchase price. PMI protects the lender—not you—if you stop making payments on your loan.

The requirement to buy PMI usually also applies to refinancing a conventional loan, when your equity is less than 20 percent of the value of your home.

PMI is arranged by the lender and provided by private insurance companies. It insures the lender against loss caused by borrowers failing to make loan payments. Make no mistake: If you fall behind on your mortgage payments, PMI does not protect you and you can still lose your home through foreclosure.

PMI can help you qualify for a loan that you might not otherwise be able to get. But it can increase the cost of your loan.

Before agreeing to a mortgage, ask lenders what PMI choices they offer.

The most common way to pay for PMI is a monthly premium.

• The premium is shown on your Loan Estimate and Closing Disclosure on page 1, in the Projected Payments section.
• The premium is added to your mortgage payment.

Sometimes you pay for PMI with a one-time up-front premium paid at closing.

• The premium is shown on your Loan Estimate and Closing Disclosure on page 2, in section B.
• If you make an up-front payment and then move or refinance, you might not be entitled to a refund of the premium.

Sometimes you pay with both up-front and monthly premiums.

• The up-front premium is shown on your Loan Estimate and Closing Disclosure on page 2, in section B.
• The monthly premium added to your monthly mortgage payment is shown on your Loan Estimate and Closing Disclosure on page 1, in the Projected Payments section.

Lenders might offer you more than one option. Ask the loan officer to help you calculate the total costs over a few different timeframes that are realistic for you.

You might consider saving up the money to make a 20 percent down payment. When you pay 20 percent down, PMI is not required with a conventional loan. You could also receive a lower interest rate with a 20 percent down payment..