What is Private Mortgage Insurance (PMI)? 🤔
This is insurance that helps protect lenders if the borrower doesn’t pay back their loan. 💰
You usually need PMI when you put a down payment that is less than 20% for a regular home loan. 🏡
PMI lets lenders give loans with smaller down payments. However, it costs the borrower more money each month for their mortgage.
How Much Does Private Mortgage Insurance (PMI) Cost?
The cost of this insurance can vary depending on factors like the amount of your down payment and your credit score.
Generally, PMI costs between 0.3% to 1.5% of the original loan amount per year. So, for a $500,000 loan, the cost would be between $1,500 and $7,500.
This cost is usually divided into monthly payments and added to your mortgage payment.
Do I have to Pay PMI forever?
No! Your mortgage lender will stop charging you for PMI automatically.
This happens either after you’ve paid off half of your loan term, or when you’ve built up enough equity in your home — meaning you own at least 22 percent of it, or when your LTV (loan-to-value) ratio drops to 78 percent.
If your lender doesn’t automatically cancel the PMI, you can simply request them to do so.