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

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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.

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PMI also only applies to conventional loans. Other loans types will have their versions of insurance for the lender, but they can work differently from PMI.

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When Is PMI Required? PMI may be required when you’re purchasing a house or refinancing your mortgage. In addition, lenders may require PMI on certain loans if: - Your down payment is less than 20% - For refinance loans: Your loan-to-value ratio is over 80%

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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. The most common PMI payment methods include: - Monthly Premium - Upfront Premium - Monthly and Upfront Premiums

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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. You can request to have the BPMI payment canceled once you’ve hit the 20% equity mark, but lenders are not required to agree to do so.

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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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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. With Split PMI, you’d pay part of the PMI as a lump sum at closing (like SPMI) and the rest as a regular monthly payment as with BPMI.

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Lender-Paid Mortgage Insurance With lender-paid mortgage insurance (LPMI), technically, the lender will pay the mortgage insurance premium. However, you will pay for the PMI during the mortgage repayment in the form of a slightly higher interest rate.

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