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What Is Mortgage Insurance?

Mortgage InsuranceMortgage insurance, often referred to as PMI, is paid by most first time home buyers. What is PMI? When do you pay it? And when, if ever, does it go away? Continue reading below for the answer to these important questions.

What Is Mortgage Insurance?

Mortgage insurance typically applies to home loans with less than 20% down. It protects the lender if you default on your loan. On average, when a property goes into foreclosure, the lender is unlikely to recover more than 80% of the home’s value. Mortgage insurance helps to cover losses resulting from that shortage, which is why it applies to loans with low down payments.

When Do You Pay Mortgage Insurance?

Mortgage insurance payments may be due both at closing and on a monthly basis, depending on the loan program. For example, FHA loans have both an up-front and monthly mortgage premium. Conventional loans generally have only a monthly premium.

How Can You Eliminate Mortgage Insurance?

Whether mortgage insurance can be removed depends, again, on the particular loan program. For FHA loans, mortgage insurance cannot be removed unless the loan is refinanced. For most conventional loans, mortgage insurance disappears when the loan is paid down to a certain percentage (i.e. 78%). The specific benchmark should be noted in the loan terms. It may also be possible to get mortgage insurance removed by demonstrating that home prices have risen (via an appraisal).

What You Should Know About Mortgage Insurance

It is important to consider mortgage insurance rates and terms when evaluating different home loan options. There are also loan options on the market that do not have monthly mortgage insurance, but these usually have a higher interest rates in exchange. As your lender for additional information on this and other related topics.

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Attorney John J. Martino offers a broad range of legal services in Eastern MA and Southern NH. As a highly dedicated and experienced professional, he handles cases under the following areas of practice:

Estate Planning

Family Law and Divorce

Real Estate Law

Probate Proceedings

Business Law

Personal Injury

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