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Private Mortgage Insurance (PMI)
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.
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