Checking out an online piece dealing with some technical adjustments having to do with mortgage insurance the other day, we came across an indisputable statement:

“Many homeowners are confused about the difference between PMI (private mortgage insurance) and mortgage protection insurance (MPI).”

That, if anything, is a considerable understatement—especially because Cherokee and Cobb County homeowners can sometimes find “mortgage protection insurance” abbreviated as well. If your professional duties include distinguishing the finer points of Cherokee and Cobb County mortgages for your clients, you are unlikely to confuse “PMI” with “MPI.” But for the rest of humanity, that’s not necessarily the case. Since the difference is substantive, here’s a 30- second primer:

PMI is Private Mortgage Insurance. It’s designed to protect the lender rather than the homeowner. If Cherokee and Cobb County homeowners run into trouble—for instance, if they were to lose their job—the PMI coverage will reimburse the lender for any shortfalls. PMI coverage is usually required when Cherokee and Cobb County homebuyers pay less than 20% of a property’s sale price as the down payment. When the loan-to-value (LTV) of the mortgage reaches 78%, these policies can usually be canceled (sometimes that’s done automatically).

MPI is Mortgage Protection Insurance—a very different animal. This protects the Cherokee and Cobb County homeowners, covering missed mortgage payments for designated periods of time under specific circumstances. Unlike PMI, this insurance is strictly voluntary on the homeowner’s part. MPI policies may pay off the entire mortgage if the homeowner dies—but those who have adequate life insurance policies may find that expense unnecessary.

To make these acronyms even more confusing, the ‘mortgage insurance premium’ is sometimes referred to as the MIP. This means you pay your MIP to cover your PMI, which has nothing to do with your MPI. Sheesh!

But don’t worry; a big part of our job is to be sure our clients stay informed about how each part of a home buying or selling procedure stands to affect their interests. We hope you’ll call us whenever Cherokee and Cobb County real estate matters arise!