Mortgage insurance vs. homeowners Insurance

Homeowners insurance

Homeowners insurance is financial protection for the homeowner. It covers your property and liability in the event of a claim. The homeowner make these payments.

Mortgage insurance

Mortgage insurance protects a mortgage lender's financial investment in your home. It’s paid for by the homeowner, but it’s designed to cover the lender in the event you stop making payments on your mortgage.

Homeowners insurance

• Dwelling coverage: Covers the structure of your home if it’s damaged or destroyed by a covered loss

• Other structures coverage: Covers any structures that aren’t attached to your home, like a garage

• Personal property coverage: Protects your personal belongings if they’re stolen or damaged both on or off your property

• Loss-of-use coverage: Pays for you to live elsewhere while your home is being repaired due to a covered loss

• Liability coverage: Pays for legal expenses and medical bills if you’re held liable for an injury or property damage

• Medical payments coverage: Pays for your guests medical expenses if they’e hurt while in your home — regardless of who’s at fault

Mortgage insurance

The mortgage insurance premiums you make protect the lender in the event you stop paying off  your loan. Even if your house is in foreclosure, you have to keep paying your PMI. 

Homeowners insurance

Home insurance costs $1,249 per year on average. You should have enough dwelling coverage to fully cover the costs of rebuilding your home if it is destroyed. The homeowner is responsible for paying homeowners insurance.

Mortgage insurance

Private mortgage insurance typically costs 0.2% to over 2% of the original mortgage amount. The premiums stay fixed for the duration of your policy period, meaning they won’t go up. Many lenders will allow you to cancel your PMI once you’ve paid off 22% of your loan, but you may be able to request early cancellation. The homeowner is responsible for paying mortgage insurance premiums, and the payments go straight to the mortgage lender. 

Homeowners insurance

Home insurance isn’t required by law, but a lender may require it if you want to take out a mortgage. Even if you don’t have a mortgage or already paid yours off, you should still get homeowners insurance. Going without it would leave you financially on the hook for any damage to your home.

Mortgage insurance

Mortgage lenders typically require private mortgage insurance if you take out a loan and your down payment on the house is less than 20% of the home’s price.