Definition: The term "mortgage insurance" typically refers to a type of insurance that protects buyers or homeowners from potential losses due to non-payment of their mortgages. This policy may cover specific types of defaults, such as late payments, defaulting on mortgage payments, or not making required payments. When someone takes out a mortgage, they agree to pay the lender back over time in order to obtain the property they are buying. The amount of money that is covered by a mortgage insurance policy is usually based on the risk of default and the amount of loss that the borrower may incur if they fail to make their monthly payments. If the borrower defaults on the mortgage, the insurer will provide coverage under the policy, which typically amounts to either a lump sum payment or an interest-free loan. The lender then pays back the lender's money from the insurance policy to the borrower in full, minus any penalties and costs associated with the default. Mortgage insurance is designed to protect borrowers against financial losses if they fail to make their mortgage payments on time, even when the lender has made timely efforts to repossess or foreclose on the property. It can be a useful tool for buyers who want peace of mind about their investment in a home they are buying. The specific definition and usage of the term "mortgage insurance" may vary depending on the jurisdiction you are in, but generally it refers to coverage provided by banks or mortgage lenders to protect homeowners against defaulting on their mortgages.
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