Private Mortgage Insurance-PMI- Why Do I Need It?
Private mortgage insurance or PMI as it is called is insurance that protects the lender not you the borrower. It is required on all Fannie Mae loans where the loan to value is over 80%. Loan to value ratio or LTV is calculated by taking the amount of the loan dividing it by the market value of the home. If a home is worth $100,000 and you had a mortgage of $90,000 the LTV would be 90% which means you would need PMI. If you default on the mortgage the lender is paid the difference between 80% and your loan to value. On the example above the lender would be paid on 10% by the private mortgage insurance company. This would amount to $10,000. The monthly fee for PMI varies depending upon how large your mortgage is. The larger the mortgage the higher the premium. The mortgage insurance premium is larger the higher up you go on the loan to value. It will be higher at 95% than at 90% because the risk is greater for the mortgage insurance company.
Private mortgage insurance or PMI as it is called is insurance that protects the lender not you the borrower. It is required on all Fannie Mae loans where the loan to value is over 80%. Loan to value ratio or LTV is calculated by taking the amount of the loan dividing it by the market value of the home. If a home is worth $100,000 and you had a mortgage of $90,000 the LTV would be 90% which means you would need PMI. If you default on the mortgage the lender is paid the difference between 80% and your loan to value. On the example above the lender would be paid on 10% by the private mortgage insurance company. This would amount to $10,000. The monthly fee for PMI varies depending upon how large your mortgage is. The larger the mortgage the higher the premium. The mortgage insurance premium is larger the higher up you go on the loan to value. It will be higher at 95% than at 90% because the risk is greater for the mortgage insurance company. The monthly fee for private mortgage insurance
