Private Mortgages vs. Private Mortgage Insurance

By Mark Bonders for mortgage-and-loan-info.com

Private mortgages and private mortgage insurance are two very different things yet people tend to view them as the same. But don't worry; you are not alone in this view. The world of money lending can indeed be very confusing for anybody. However, unless you take the time to know more about the mortgage terms that affect you, no mortgage payment calculator will ever be able to help you.

A private mortgage is considered as such IF the lender is not a traditional mortgage lender, meaning the lender is not a bank, insurance company, credit union or trust company. The advantage is that you might get your loan faster at lower interest rates. The disadvantage of course is that you are never really sure if the person you are dealing with is legitimate. And if you are really clueless when it comes to home loans, then it's easy for just somebody to spin tales and you end up paying far more than you should have.

Private mortgage insurance on the other hand means protection, not for you though but for the mortgage lender. Private mortgage insurance is required if you are putting down less than a 20% down payment on your home. It serves to protect the home mortgage lender from suffering any possible losses should you default on the mortgage.

Many people dislike private mortgage insurance because they feel that if they are paying the premium then why is the lender the one that is insured. That's one way of looking at it. But the other way is that private mortgage insurance enables you to buy a home even if you can only afford to give 5% to 10% for down payment. This is not a bad deal especially for first-time home buyers who may be a bit cash-strapped.

Private mortgage insurance costs depend on the insurance provider, the amount of the home loan, the mortgage terms and others, but monthly payments are usually in the $25 to $100 range for middle-priced homes.