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


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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