What is private mortgage insurance (PMI) and is it required?
Private mortgage insurance (PMI), also known as lenders mortgage insurance, is insurance payable to a lender that may be required when taking out a mortgage loan. It is an insurance in the case that the mortgagor is not able to repay the loan, and the lender is not able to recover its costs after foreclosing the loan and selling the mortgaged property. The annual cost of PMI varies between 0.19% and 0.9% of the total loan value, depending on the loan term, loan type, and proportion of the total home value that is financed. PMI is not required of the borrower in this program, since the UB Foundation is the guarantor of the loan, thus saving the borrower thousands of dollars. For example, if the PMI of a mortgage is $50.00 a month (added onto the monthly payment), times 12 months for a term of 30 years, the PMI for a home would total $18,000. Or, on a house priced at $150,000, the PMI is typically $98.00 per month, which adds up to $35,280 over the course of a 30-year mortgage.
