What is PMI (Private Mortgage Insurance)?

Anytime you owe more than 80% loan to value (loan amount divided by home value) or make a down payment of less than 20%, you are required to pay PMI. PMI protects the bank or lender in the event of a default. The more risk the bank or lender takes on, or higher loan to value, the more expensive PMI is. PMI can be paid multiple ways and certain loans require meeting certain parameters.

FHA loans require an upfront PMI payment and an annual premium paid for a minimum of five years. The annual premium declines as loan to value decreases. Conventional loan’s PMI can be paid numerous different ways. You can pay an annual premium, a one-time finance upfront premium, or have the bank or lender pay for either premium for you. Keep in mind the rate will be a little higher if the bank or lender is paying the premium for you, the loan’s interest rate will be higher.

There are ways to eliminate PMI such as splitting your financing between a first and second loan if you wish too. Ask your Infinity Financial Group loan consultant about your options.