PRIVATE MORTGAGE INSURANCE If your down payment on a home is less than 20% of the appraised value or sale price, you must obtain mortgage insurance. Mortgage Insurance sometimes is referred to as private mortgage insurance or PMI, to distinguish it from FHA and VA insurance, run by government Programs. The cost of mortgage insurance varies depending on the size of the down payment and the loan, but it typically amounts to about one-half of 1 percent of the loan. With mortgage insurance, the borrower pays the premiums, but the lender is the beneficiary. The coverage protects lenders against default by the borrower. If a borrower stops paying on a mortgage, the insurance company ensure that the lender will be paid in full. Mortgage companies pick insurance providers for their customers, but the borrowers have to foot the bill. Usually, they do so in monthly installments. But some lenders offer programs whereby the borrower pays the entire insurance premium in a lump sum at closing. Ditch your Private Mortgage Insurance! PMI is cancelled automatically when the loan balance is reduced to 78% of the homes value, More importantly, the law also requires that lenders terminate the insurance at the borrower’s request when the balance hits 80% of the total loan, and early cancellation could mean a significant chunk of change
Posted on: Mon, 03 Mar 2014 23:38:39 +0000
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