PRIVATE MORTGAGE INSURANCE HELPS YOU GET THE LOAN

Private Mortgage Insurance, also known as PMI, is a supplemental insurance policy you may be required to obtain in order to get a mortgage loan. PMI is provided by private (non-government) companies and is usually required when your loan-to-value ratio — the amount of your mortgage loan divided by the value of your home — is greater than 80 percent.

PMI isn't a bad thing — it allows you to make a lower down payment and still qualify for a mortgage loan. In fact without PMI, many of us would not be able to purchase our first home.

How is PMI calculated?

Your PMI premium is fixed based on plan type (loan-to-value ratio, loan type, loan term, property type, etc.) and is related to your particular credit history.  The premium payment is usually rolled into your monthly mortgage payment.  The amount of the PMI specific to your transaction is disclosed to you in writing before you become obligated on the loan.

Can the PMI be eliminated after loan closing?

Yes. If you pay down the loan balance below 80%, the PMI premium will be cancelled. It is not necessary to refinance the loan to accomplish this. You can usually have the PMI removed if the property value goes up sufficiently. There is normally a two year waiting period required, and you will have to pay for a new appraisal to prove to the lender that the value of the property has risen enough that the loan is now less than 80% of the home's value. Again, the termination features of the PMI coverage are disclosed in writing at the time of application.