Understanding Mortgage Insurance (PMI)

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Private Mortgage Insurance (PMI) helps you get the loan.

Mortgage Insurance, also known as PMI, is a supplemental insurance policy you may be required to obtain in order to get a mortgage loan. PMI is provided by private (non-government) companies and is usually required when your loan-to-value ratio – the amount of your mortgage loan divided by the value of your home – is greater than 80 percent.

Mortgage Insurance isn’t a bad thing – it allows you to make a lower down payment and still qualify for a mortgage loan. In fact without PMI, many of us would not be able to purchase our first home.

Types of Mortgage Insurance premiums:

  • Monthly Premium. The amount to be paid for your mortgage insurance is calculated and divided by the number of months you will be required to carry it based on the amortization schedule and when you will reach 80% LTV.
  • Financed Premium. Your mortgage insurance total is divided by the term of your loan, making the premium less per month, but carried over the life of the loan.
  • Lender-Paid Premium. We can pay your mortgage insurance premium for you! This generally is funded by discount point(s) or a rate adjustment.

Your Paramount mortgage banker can illustrate the options for you and show how your monthly payment can be affected by Mortgage Insurance, if required.