PMI: A Full Guide to Private Mortgage Insurance | Chase – Chase News & Stories


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When you take out a home loan or refinance your mortgage, your lender may require you to pay for an additional type of insurance – private mortgage insurance.
When do you have to pay private mortgage insurance (PMI) and how much will it cost you? It depends on your loan-to-value (LTV) ratio. Find out when you have to pay PMI and learn how to calculate the cost.
PMI is a type of insurance that lenders require for certain mortgages with high LTV ratios. Lenders always accept some level of risk with mortgages. However, PMI can help lower the risk that some mortgages bring.
Although you pay for PMI as the borrower, this insurance doesn’t protect you. Instead, it protects the lender. If you default on your mortgage, PMI pays part of the remaining balance of the loan to the lender.
However, PMI does offer some benefits to you as the borrower. Paying PMI may help qualify you for a conventional loan that you wouldn’t be eligible for under other circumstances.
You may have to pay for PMI if you’re purchasing a house or refinancing your mortgage. Lenders may require PMI on certain loans if:
As the buyer, you don’t choose your PMI provider. Instead, lenders arrange PMI directly with their provider of choice, so you don’t have to take any additional steps. PMI rates may vary among lenders and mortgage types.
If you have to pay PMI, your lender will set up the payment and coverage, connecting the PMI directly to your loan. That means you don’t have to worry about remembering an extra payment or providing proof of PMI. Instead, your lender charges you for it automatically.
There are a few ways to handle PMI payments. Some lenders may let you choose a payment method. Others require you to agree to a specific option. The most common PMI payment methods include:
On average, PMI costs range between 0.22% to 2.25% of your mortgage. How much you pay depends on two main factors:
Lenders typically maintain charts that show the PMI percentage to charge in various situations. You can ask your lender for a specific percentage to make your calculations easier.
To calculate your PMI, ask your lender for your PMI percentage or use the range listed below. Then follow these steps:
If you’re concerned about this extra expense, you’ll be relieved to know that PMI usually ends before your loan does since lenders only require you to pay PMI while your LTV is above 80%. Once your LTV is below 80%, you can request to stop paying PMI.
To determine when your loan will reach the point where you no longer need PMI, lenders use an amortization schedule. If you opted to pay PMI at closing, your lender already used this schedule to calculate your total PMI amount. In most cases, you can’t reduce or get a refund for part of your upfront premium.
If you pay a monthly premium, you may be able to eliminate PMI a little early since lenders end PMI automatically when you’re scheduled to reach the 78% LTV point. You may qualify for early PMI termination if you meet the following criteria:
Call your lender to cancel PMI early if you meet these qualifications. Typically, your lender will request a broker price opinion (BPO) to confirm the current market value of your home. Your lender needs this data to calculate your current LTV. If the value of your home has decreased significantly, your LTV may have increased, which could disqualify you for early PMI termination.
As the borrower, you generally have to pay for the BPO or appraisal, which could cost a few hundred dollars. Depending on your monthly premium, however, ending PMI early could save you hundreds or thousands of dollars.
In many cases, you can avoid paying PMI altogether. Some of the following strategies could help you save on PMI costs. Ask your lender to help you do the math to find the most affordable option for you.
When you’re planning to buy a house, review your savings to calculate the maximum down payment you can afford. If you can put down at least 20% of the home price, you can avoid paying PMI. To get to the 20% mark, you may need to save a little more or rethink the house you want to buy.
If you’re planning to refinance your home but the current LTV is over 80%, consider paying off more of your mortgage balance first. If your mortgage servicer doesn’t penalize you for prepayments, you can consider paying off more of your mortgage right away. Otherwise, you may have to wait until you’ve made a few more monthly payments.
Some lenders may offer alternative options even if your LTV is over 80%. Ask your lender about higher-interest loans, which may help them manage risk without charging PMI. If you aren’t sure whether a higher-interest loan is worth saving on PMI costs, ask your lender for a direct comparison.
This handy guide will help you decide exactly how much of your salary you should be spending on mortgage payments every month.
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Learn how mortgage payments work, how to pay them back, and the pros and cons of monthly versus biweekly mortgage payments.
These articles are for educational purposes only and provide general mortgage information. Products, services, processes and lending criteria described in these articles may differ from those available through JPMorgan Chase Bank N.A. or any of its affiliates. For more information on available products and services, and to discuss your options, please contact a Chase Home Lending Advisor.
We offer a variety of mortgages for buying a new home or refinancing your existing one. New to homebuying? Our Learning Center provides easy-to-use mortgage calculators, educational articles and more. And from applying for a loan to managing your mortgage, Chase MyHome has everything you need.
Whether you’re determining how much house you can afford, estimating your monthly payment with our mortgage calculator or looking to prequalify for a mortgage, we can help you at any part of the home buying process. See our current mortgage rates, low down payment options, and jumbo mortgage loans.
Refinance your existing mortgage to lower your monthly payments, pay off your loan sooner, or access cash for a large purchase. Use our home value estimator to estimate the current value of your home. See our current refinance rates and compare refinance options.
Our affordable lending options, including FHA loans and VA loans, help make homeownership possible. Check out our affordability calculator, and look for homebuyer grants in your area. Visit our mortgage education center for helpful tips and information. And from applying for a loan to managing your mortgage, Chase MyHome has you covered.
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