What You Need To Know About Private Mortgage Insurance

Dated: 04/09/2018

Views: 81

Mortgage insurance allows a lot of people to become homeowners who otherwise might not be able to by allowing you to put down less money than the traditional 20%. It’s natural to want to put down as little money as possible, but this will likely require you to have Private Mortgage Insurance (PMI). As real estate professionals, we'll help you consider the real costs now versus down the road.

So what is PMI? The concept behind mortgage insurance is not quite the same as with other insurance plans. You pay a monthly premium to the insurer who protects the mortgage lender in the event you default. PMI is for the benefit of the mortgage lender, not yours. Because the lender is assuming additional risk by accepting a lower amount of upfront money towards the purchase, they will often call for the borrower to purchase private mortgage insurance. The cost of PMI is based on the size and type of mortgage loan you are applying for, your down payment and credit score. The average annual cost can typically range from 0.41% to 2.25%.

You might be wondering if you'll be paying PMI for the entire duration of the loan. Once your mortgage principal balance is less than 80% of the original appraised value or the current market value of your home, whichever is less, you can generally cancel the private mortgage insurance. Mortgage lenders are required to tell you at closing how long it will take for you to reach that loan-to-value mark, and update you annually of any cancellation options.

Mortgage insurance for FHA or VA loans operate a little differently from conventional mortgages so make sure to consult your team of real estate experts when weighing your options. 

When deciding how much to put down, it's ultimately a matter of balancing your short-term financial capabilities with your future savings and earnings potential to determine the best long-term financial result for you. Feel free to email or call us if you have any questions about down payments or PMI.

Blog author image

Michael - Colette Thiel

Michael Thiel, CalBRE#01893556 Colette Thiel, CalBRE#01455972 ....

Latest Blog Posts

SEPTEMBER TO DO LIST

From the first days, which probably still feel like summer, to the last, when you may notice that first chill in the air, September is a time of transition. Get your home ready for the season ahead

Read More

YOUR FIRST HOME BASICS YOU NEED

Your First Home: Beautiful BasicsHere’s what to choose and what to avoid when outfitting a new house Whether you are getting married, buying your first home in Simi Valley from Thiel Real

Read More

10 FREE IDEAS FOR SPENDING TIME WITH YOUR FAMILY THIS WEEKEND

Spending time with the family can be a blessing and a curse. I mean, we all love these guys but sometimes their idea of spending time together can be costly (such as an amusement park).  Living

Read More

5 Things You Didnt Know Your Bedroom Needed

Don’t miss out any longer — these additions to your sleep space can make life so much lovelierAlthough our specialty at Thiel Real Estate and Property Management may be finding you that

Read More