How Much Is PMI (Private Mortgage Insurance)? What You Need to Know

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PMI is an insurance policy for the lender in case you stop making your monthly payments. Depending on your LTV (loan to value) ratio and other factors, your PMI cost may vary.

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PMI is essentially an additional payment as part of your mortgage that acts as insurance for the lender of a mortgage if the borrower stops paying back their loan. Typically, PMI is automatically canceled once you reach 22% equity in your home, though.

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Who Provides PMI? If you do need to pay PMI, your lender, not you, will choose the provider of the PMI. In most cases, you won’t know the provider as you make the payment directly to your lender, and they will pass the PMI portion along to the PMI provider.

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When Do You Pay PMI? PMI payments can be paid in a few ways depending on PMI type (more on that below). Your lender may let you choose how you pay your PMI, and others will make that decision for you.

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Types of Private Mortgage Insurance (PMI)

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Borrower-Paid Mortgage Insurance Borrower-Paid Mortgage Insurance (BPMI) is the most common type of PMI. BPMI is an extra payment you make each month in addition to your regular mortgage payment.

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Single-Premium Mortgage Insurance Single-premium mortgage insurance (SPMI) works a little differently than BPMI. With SPMI, the borrower pays the entirety of the PMI payment upfront. SPMI can be paid either in full at closing or financed into the mortgage.

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Lender-Paid Mortgage Insurance With lender-paid mortgage insurance (LPMI), technically, the lender will pay the mortgage insurance premium.

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Split-Premium Mortgage Insurance Another form of PMI is Split-premium mortgage insurance, but it is the least common form of PMI. The best way to describe Split Premium PMI is a combination of BPMI and SPMI.

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There is a lot that goes into PMI. Nobody wants to add additional payments to their mortgage, but it may or may not be the better option depending on your financial situation. In most cases, avoiding PMI by reaching the 20% down payment threshold is best, but that’s not always possible.

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