Quote:
Originally Posted by tvp2003
This is true in a sense, but not what a lot of people probably think. The insurance guarantees the mortgage for the lender. In other words, if you end up underwater in your mortgage and the bank has to foreclose on your house, the insurance will make the bank whole, but the borrower can still be liable for any shortfall that the insurance had to cover.
So unlike a conventional mortgage, you can’t just walk away from an insured mortgage because you’ll still be on the hook for any shortfall. In Kiran’s case it won’t be an issue because of what has already been paid off (along with property values increasing), but it’s worth mentioning because I had no idea when we bought our first place that this was the case…
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For sure, the only advantage to the borrower going forward is that the guarantee to the lender means you can generally get a better rate.