Mortgage insurance is insurance that protects a lender in the event that a borrower defaults on their loan. In the event of a borrower default, the mortgage insurance company will provide payment to the lender to cover some or all of their losses.
Private mortgage insurance (PMI) is usually required for conventional loans with a down payment of less than 20%. FHA and VA home loans also include mortgage insurance, but it is provided by the government in the form of a guarantee to the lender to cover losses incurred on borrower defaults.
Mortgage insurance premiums are usually added to the borrower’s monthly mortgage payment. However, there are programs that allow mortgage insurance premiums to be paid upfront when a loan is obtained.
Mortgage interest payments may cease after a loan reaches a certain loan-to-value (LTV) ratio, though sometimes they continue for the life of the loan.