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Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) protects
lenders against loss due to foreclosure. Most lenders require
PMI when the down payment is less than 20 percent. The PMI
premiums are paid by the borrower and the policies are provided
by private mortgage insurance companies. PMI is NOT mortgage
life insurance. PMI protects the lender against loss. Mortgage
life insurance protects your home and family by paying all or a
portion of your mortgage in the event of your death.
Methods of paying for PMI have changed over the
years. Prior to 1994, borrowers paid twelve to fifteen months'
premiums at close of escrow. In 1994, borrowers could pay as few
as two months' premiums at closing, and then pay a monthly
premium with each mortgage payment. In 1998, a borrower could
finance a single lump-sum mortgage insurance premium as part of
the loan amount. In 1999, private mortgage insurance companies
began borrowing Fannie Mae's new "Lowest-Cost MI" program. The
new program allows borrowers to finance or pay up front a
portion of premiums and, in return, receive a lower monthly
premium rate. With each new strategy, home ownership has become
more affordable for more people.
How much does PMI cost? The cost of PMI depends
on the percentage of the down payment and the type of loan. Here
are some sample PMI charges. These are guidelines only. Payment
factors are subject to change. Please contact your lender or
broker to get the cost of PMI on your loan.
|
LTV |
30 year fixed |
15 year fixed |
30 year adjustable |
|
95% |
0.78% |
0.72% |
0.92% |
|
90% |
0.52% |
0.46% |
0.65% |
|
85% |
0.32% |
0.26% |
0.37% |
Example: If you are getting a 30 year fixed
loan, and are putting 10 percent down, the PMI premium is 0.52
percent. If your loan amount is $100,000, your PMI payment will
be $100,000 x (.52/100)x 1/12 = $43.33 per month. |
