What is PMI?
Lenders require Private Mortgage Insurance (PMI) when a borrower makes less than a 20% down payment on the home being purchased. PMI protects the lender from loss if the borrower fails to make mortgage payments. The good news is the borrower is usually relieved from paying PMI once the equity in the home exceeds 20%.
Private mortgage insurance, or PMI, insures the lender against a default. It is required when the borrower is making a cash down payment of less than 20 percent of the purchase price. PMI costs vary from one mortgage insurance firm to another, but premiums usually run about 0.50 percent of the loan amount for the first year of the loan. Most PMI premiums are a bit lower for subsequent years. The first year’s mortgage insurance premium is usually paid in advance at the close of escrow, and there is usually a separate PMI approval process. Lenders generally turn to a list of companies with whom they regularly work when lining up private mortgage insurance. In most cases, PMI can be dropped after the loan-to-value ratio drops below 80 percent. The Homeowners Protection Act requires PMI to be dropped when the loan-to-value ratio reaches 78 percent of the home’s original value AND the loan closed after July 29, 1999. For other loans, find out from your lender what procedure to follow to hav
PMI stands for Private Mortgage Insurance. This insurance, provided by non-government insurers, protects a lender against loss if the borrower defaults. PMI insurance is required on any loan with a LTV (Loan To Value) of greater than 80%. The amount of coverage depends on the loan program and the level of down payment. PMI costs more on a Loan with 5% down than a loan with 15% down.
A. PMI is Private Mortgage Insurance. It is required when a borrower makes less than a 20% down payment on a house. This partially protects the lender from loss if the borrower fails to make the mortgage payments. Depending on your loan program, but generally when you’ve paid off 20% of your loan, you may ask for the PMI requirement to be removed. This will decrease your total monthly loan payment. When your LTV (loan-to-value) ratio is 80% or below, you may ask for the PMI requirement to be removed. PMI deletion requirements vary according to loan program and state requirements. Current First Horizon loan customers may determine if you are eligible to remove PMI Insurance by accessing our Interactive Telephone Response System by calling 1-800-364-7662, and after selecting your language preference, select option #2 for PMI information.
