What is
Private Mortgage Insurance?
What is the difference
between Private Mortgage Insurance (PMI) and FHA loan Insurance?
How is
Private Mortgage Insurance- PMI added?
How
much is my Mortgage Insurance?
Who Can I speak to About Dropping my Mortgage Insurance?
Private Mortgage Insurance
Private mortgage insurance
is a type of insurance that helps protect the mortgage company
(the insurance does not protect the
borrower!) against losses
due to foreclosure. This protection is provided by private mortgage insurance
companies and allows mortgage companies to accept lower down payments than
would normally be allowed.
Private mortgage insurance also enables mortgage companies to grant loans
that would otherwise be considered too risky to be purchased by third party
investors like the Federal National Mortgage Association (FNMA) and the
Federal Home Loan Mortgage Corporation (FHLMC). The ability to sell loans to
these investors is critical to maintaining mortgage market liquidity, which
in turn, allows mortgage companies to continue originating new loans.
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PMI vs FHA MIP
Although the insurance
protection concept is similar, there are differences between private mortgage
insurance and FHA mortgage insurance. FHA insurance is a
government-administered mortgage insurance program that does have certain
restrictions. FHA has maximum regional loan limits that are lower than those
with private mortgage insurance. FHA may be more expensive, take longer to
receive approval, and have fewer payment plan options. FHA insurance lasts
for the life of the loan, unlike private mortgage insurance which is
cancelable in most circumstances. FHA is a good choice for some borrowers
with credit history problems that might need special assistance.
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Calculating
the PMI
When you purchased your house your lender most likely added mortgage
insurance, also called Private Mortgage Insurance (PMI), to your monthly
payment unless you made at least a 20% down payment. This payment is based on
the original mortgage amount and is paid as part of your monthly mortgage
payment until you show that your house has increased in value, including
additions and improvements to the point that your loan is 80% of your current
house value.
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Cost of PMI
The only way to find out
is to call your lender's customer service representative. However, typically
the cost is $0.38-$0.78 per $100 of your loan amount. See following examples:
| Orig. Loan Amount |
5% |
10% |
15% |
| $100,000 |
$65.00 |
$43.33 |
$31.67 |
| $150,000 |
$97.50 |
$65.00 |
$47.51 |
| $200,000 |
$130.00 |
$86.66 |
$63.34 |
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