Private Mortgage Insurance: How it can be paid.

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The different ways Private Mortgage Insurance (PMI) can be paid.

How does PMI work?

In old-school traditional PMI if you put less than 20% down on a home you had to have Private Mortgage Insurance and it was always a monthly payment. Now there are other ways to do PMI.

There is the monthly payment which is the traditional method- typically it lasts about 10 years. Once that loan hits 78% of the original purchase price that PMI automatically drops off on a conventional loan.

The second way is one-time upfront PMI. An example of that is:

If someone did a 90% loan and had a pretty high credit score they would have a PMI factor of approximately 1.4 percent so on a $300,000 loan that’s going to be about $4,500. That’s a lot easier than coming up with a whole another 10% which is $30,000 if we go monthly. You would have the one-time up for a PMI that can be paid out closing and then you never have a monthly PMI payment.

Another option is split PMI. You can split that upfront into a portion that’s paid upfront and a smaller monthly and that again that monthly would drop off once you hit 78%.

The last way is lender paid at PMI where the lender actually pays the PMI so there’s no monthly PMI fee ever to the borrower. Typically it affects the rate slightly but usually the payment difference and that slight adjustment is so much lower than what that would have been it’s a much more beneficial way to do it if somebody’s very payment conscious.

So it’s not one-size-fits-all decision!

My job is as a professional to assess the situation and provide solutions and guide you to the best way to go. Ultimately it’s your decision. Keep in mind people that are waiting for a 20% down payment : you just can’t out save at the pace of this real estate market!

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