Question:

How much is the cost of the private mortgage insurance (PMI) premium?

Answer:

The private mortgage insurance (PMI) premium varies according to the down payment provided by the borrower. No very long ago, lenders would lend up to 80% of the appraised property value. The introduction of the private mortgage insurance (PMI) premium made it possible for many people to purchase a home they couldn't otherwise afford.

Also, in the recent past the private mortgage insurance (PMI) premium amounted to a huge portion of the loan - more than 2% - and was paid upfront. Now, the private mortgage insurance (PMI) premiums are spread over the life of the loan.

Private mortgage insurance (PMI) premiums depend on the loan-to-value ratio.

The higher the LTV, the higher the private mortgage insurance premium. LTV of 95% on a 30-year conventional fixed rate mortgage makes a monthly PMI premium of around 0.75%/12. LTV of 90% brings the private mortgage insurance (PMI) premium down to around 0.5%/12. LTV of 85% makes for a monthly private mortgage insurance (PMI) premium of 0.3%/12.

When equity of 20% is reached, PMI is cancelled if the borrower is on track with payment. Private mortgage insurance (PMI) premium cancellation is required - either the borrower can request it when equity level is reached, or the lender will cancel it automatically when 22% of home equity is reached.

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Common misspellings: mortage and morgage