Mortgage Protection Insurance (MPI) and Private Mortgage Insurance (PMI) serve different purposes despite both being related to mortgages. MPI is designed to protect the homeowner by paying off the mortgage if the homeowner dies or becomes disabled. This type of insurance ensures that the mortgage is paid directly to the lender, preventing the homeowner’s family from losing the house due to an inability to keep up with payments. MPI is particularly beneficial for individuals with health issues or risky occupations since it typically does not require medical underwriting, ensuring guaranteed acceptance.

On the other hand, PMI is intended to protect the lender if the borrower defaults on the mortgage. Lenders typically require PMI when the borrower makes a down payment of less than 20% of the home’s purchase price. PMI is added to the regular mortgage payment and does not provide any direct benefit to the homeowner; instead, it mitigates the lender’s risk by ensuring they recoup their investment if the borrower cannot meet their payment obligations. Borrowers can often eliminate PMI once they achieve 20% equity in their home.

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