What Is Private Mortgage Insurance (PMI)?
Private mortgage insurance (PMI) refers to a type of mortgage insurance that a borrower may be required to purchase as a condition to purchase a conventional mortgage loan. Similar to other kinds of mortgage insurance, PMI protects the lender from default by the borrower. PMI is arranged by the lender when a borrower applies for a conventional loan with a down payment of less than 20%. A lender might also demand PMI if a borrower is refinancing using a conventional loan and equity is less than 20% of home value. PMI is provided by a private insurance company.
There are different ways to pay for private mortgage insurance. Some lenders may provide only one option, while others may offer several alternatives. Before executing a mortgage agreement, you should consult with lenders to determine what options they offer.
The most common way to pay for PMI is a monthly premium, which means you pay a sum of money every month during the mortgage period. Sometimes, you may have the option to pay for PMI with a one-time upfront premium. Some lenders will allow you to pay a combination of upfront and monthly premiums.
- What Is Mortgage Insurance and How Does It Work?
- Should I Buy Mortgage Insurance?
- Is There a Way to Avoid Private Mortgage Insurance?
- How Can I Avoid PMI on My First Mortgage?
- Is There Any Substantial Benefit to PMI?
- How Do I Calculate Mortgage Insurance?
- When Is It Right to Have Mortgage Insurance?