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Definitions of Mortgage and Title Insurance

Mortgage Insurance is designed to protect the lender, usually a bank, against the risk of the buyer's mortgage nonpayment. Thus, it protects the lender against financial losses if the borrower defaults. Mortgage Insurance can be public and private. Public Mortgage Insurance is a government intervention in the modern housing finance market. Private Mortgage Insurance is provided by private commercial companies and it is compulsory when down payments are below 20% because the risk of default is greater on loans with smaller down payments.

Title Insurance renders protection to the lender against losses resulting from the problems connected to the title to the borrower's property.

Usually you have to purchase Title Insurance if you need a mortgage because all mortgage lenders require you to pay a single premium upfront the amount of which is equal to the loan. Normally Title Insurance is valid until the loan is repaid. This type of insurance protects the lender, not an individual, but at the latter's expense. That's why if you want added protection, it is advisable to purchase an owner's title policy for the full value of the dwelling. An owner's title policy will cover you against problems concerning legal ownership including attorney fees and other costs in defending the title.