Mortgage insurance is the dreaded premium on a mortgage payment that consumers hate, and for good reason. It makes the cost of homeownership rise over time, benefiting one group: The investor that owns the loan.
Mortgage insurance, also known as private mortgage insurance (PMI) is an integral part of many common loan programs found in the market today — FHA mortgages, USDA mortgages and, yes, even standard conventional mortgages. Mortgage insurance is paid by the consumer for the benefit of the lender to insure the loan in case the consumer defaults on the payment down the road. Mortgage insurance loans are more profitable to the mortgage markets because of the additional premiums paid to the mortgage servicer.