Compare Mortgage Quotes

Refinance Rates for Today

Please enable JavaScript for the best experience.

In the mean time, check out our refinance rates!

Company Loan Type APR Est. Pmt.

Private Mortgage Insurance for low down payment loan

Posted on: 30th Mar, 2004 11:12 pm
Private mortgage insurance (PMI) is an amount paid by a private insurance company to a lender in order to prevent losses, in case a borrower defaults on his mortgage payments. When a borrower pays less than 20% of the appraised value or sale price as the down payment on a house, he is required to pay the costs of this insurance. In other words, if the ratio of the loan offered and the appraised value of the property, that is, the loan-to-value ratio or ltv ratio is more than 80%, then a borrower has to pay for private mortgage insurance.

For example
, Sarah wants to buy a house of $1,00,000. She takes a mortgage loan of $90,000 from David. Since the loan value is 90% of the property value and the down payment is only 10%, so she will have to pay for private mortgage insurance. In case she fails to make monthly payments in time, the insurance will pay David on behalf of Sarah.

  • The PMI charges depend on the amount of down payment and loan to value ratio.

  • The mortgage insurance premiums are tax-deductible.

  • A part of the private mortgage insurance premium is paid at closing and the rest is included in the monthly mortgage payment.

  • A borrower has to pay these insurance premiums until the home equity increases to 80% of the property value. But in case of mortgages insured by the Federal Housing Administration, the private mortgage insurance is to be paid throughout the loan term.
  • Private mortgage insurance helps a borrower to take a mortgage with a down payment as low as 3% or 5%.

  • It helps lenders from losses in case the borrower fails to make monthly payments on the mortgage.
Most of the mortgages require the payment of mortgage insurance premiums but there are some conditions under which a borrower may get rid off it. One way of doing it is to accept higher interest rates or make a down payment of 10% of the appraised property-value along with a first mortgage of 80% of the appraised value and a second mortgage for the remaining 10%.

Related Article:
Related Forum Discussion
Related References:

As your credit score is quite good you will be able to qualify for a 80-20 loan. You can read about such loans from this page.

In addition I would also tell you not to go for a no-cost loan and wait until you have some savings for payment of closing costs.

You can read one of the previous discussions to know why I am saying this, no-cost loan details.

Posted on: 20th Sep, 2006 05:06 pm
hi guest,

you can buy a house with no down payment by selecting a suitable mortgage lender who is willing to offer you a loan without down payment. but then you may have to pay a higher rate of interest.

lenders do charge a higher rate of interest from borrowers providing no down payment on the purchase price. also, they charge high rates on no cost loan as the closing costs are included within the loan amount. as you are the only earning member in your family, so, if you can give yourself some more time and accumulate some savings before buying a house, that'll be great.

i would not recommend an 80-20 loan as you might have to pay a high rate of interest especially for the second mortgage. in your situation, where you couldn't save a good amount of money, it's better to avoid managing two mortgages. so, just wait for some time and gather some savings for buying the house.


Posted on: 21st Sep, 2006 12:31 am
hi guest,

you can take a no down payment or a no-cost 5/1 arm loan in order to buy a house, though you may have to afford a slightly high rate of interest. but the interest rate on this arm is around 6% currently, so you need to find a lender who is willing to offer you a loan at a preferable rate.

the interest rate on this arm will be fixed for at least 5 years after which it will go up on a yearly basis. at the end of 5 years, you can refinance the arm with a fixed rate mortgage. thus for the first 5 years your monthly payments will be fixed. within this time period, you can save a good amount of money and then use it to pay the closing costs when you refinance.

Posted on: 21st Sep, 2006 03:46 am
My HUD-1 states that the PMI is rolled into the mortgage, but I am also being charged the same amount ($2,000) at the closing for Line 902 - Mortgage Insurance Premium.. is this a mistake on the attorneys end? It has inflated my closings costs to a few dollars shy of $9,000! On a $160K loan with $20K down.
Posted on: 09th Oct, 2008 04:14 am
Hi Mike A!

Welcome to Forums!

I think its a mistake on the part of the Attorney. It will be better if you could speak to your attorney and ask him to rectify it if its a mistake.

Posted on: 11th Oct, 2008 12:26 am
Posted on: 13th Oct, 2008 09:39 pm
What would my PMI be on a Loan of $143,500 with 10% down on a 30yr fixed rate mortgage?
Posted on: 11th Dec, 2008 10:37 am
Welcome Aaron,

You can check out the following link to find a PMI calculator:

If you put in the values at the respective boxes, you will get the PMI you need to pay.
Posted on: 11th Dec, 2008 11:40 pm
Our PMI is not escrowed. If we make the mortgage payments but fall into arrears on the PMI payments what can the insurance company do to us, to our property? Can they auction off the property for example?
Posted on: 30th Mar, 2009 11:14 pm
If you do not pay the arrears on the PMI, the insurance company can stop the coverage. They may even place lien on your property.
Posted on: 01st Apr, 2009 01:57 am
how is it that your mi payment isn't escrowed? is your lender nuts?
i don't have an answer to your question, because i've never heard of such a situation.
Posted on: 01st Apr, 2009 10:49 am
My house is appraised at $193,000. I need $161,000 to refinance for a cheaper interest rate I don not currently have PMI. My question do I have to pay PMI on the $161K or just the $5K needed to meet the 80 LTV ratio? If my credit score is 720 can I find someone to do it without PMI?
Posted on: 28th Apr, 2009 06:05 pm
PMI will be based on the entire loan and will nto go away until you loan value reduces to 78% of your house value.

you need to call your lender and ask them to remove the PMI. They are suppose to remove it legally after your loan reaches 78%, but its your responsibility also.

Your loan documents may have established minimum time period for PMI. In this case, the seasoning requirement, if it exists, would be spelled out in your loan documents.

Another way to look at it:

PMI goes away one of three ways:
1) your mortgage balance reaches 78% of the original purchase price;
2) you can show that you have at least 20% equity in the home; or
3) you refinance and have at least 20 % equity in the home.
Posted on: 28th Apr, 2009 08:17 pm
Hi JJ,

Lenders generally approve loans with 75-80% LTV ratio. Loans with more than 80% LTV are considered as higher risk by the lender. Thus, even if they offer loans with more than 80% LTV, they will require you to purchase mortgage insurance and it will be based on the entire loan.
Posted on: 04th May, 2009 01:32 am
Not only will you have to purchase mortgage insurance (PMI), but your rate will most likely be higher also. Therefore, your payment will jump significantly when you go from 80LTV to 81 LTV
Posted on: 04th May, 2009 04:21 am
Page loaded in 0.058 seconds.