How Much Is Private Mortgage Insurance?

If you are looking to buy a home but are putting in less than a 20% down payment, you’ll likely be paying PMI or Private Mortgage Insurance. PMI is an insurance policy for the lender in case you stop making your monthly payments.

PMI is essentially an additional payment as part of your mortgage that acts as insurance for the lender of a mortgage if the borrower stops paying back their loan.  You’ll only have PMI to pay if you put a down payment of less than 20% on your home.

What Is PMI?

Your down payment is less than 20%: Most conventional lenders require a down payment of at least 20% of the purchase price. Therefore, you may have to pay for PMI when buying a home with a down payment of less than 20% of the purchase price.

When Is PMI Required?

For refinance loans: Your loan-to-value ratio is over 80%. If you’re refinancing your current mortgage, most conventional lenders require an LTV ratio of 80% or less to avoid paying PMI. If your LTV is over 80%, you may need to pay PMI.

When Is PMI Required?

If you do need to pay PMI, your lender, not you, will choose the provider of the PMI. In most cases, you won’t know the provider as you make the payment directly to your lender, and they will pass the PMI portion along to the PMI provider.

Who Provides PMI?

- Monthly Premium: The most common PMI option is to have an additional charge each month with your mortgage payment. - Upfront Premium: Instead of a monthly premium, another option is to pay the entirety of your PMI upfront at closing. - Monthly and Upfront Premiums: The last option is a combination of the previous two. 

When Do You Pay PMI?

Borrower-Paid Mortgage Insurance (BPMI) is the most common type of PMI. BPMI is an extra payment you make each month in addition to your regular mortgage payment.

Types of Private Mortgage Insurance (PMI)

Swipe up for more ABOUT  How Much Is Private Mortgage Insurance?