Thursday, December 19, 2013

Lets Talk PMI - Private Mortgage Insurance

PMI stands for Private Mortgage Insurance.  If you do not put 20% down on your home, then PMI is required for both FHA and Conventional Loans. I'm going to focus on Conventional Loans since that is what we are going with.

So the other night I was up bright and early and thinking about PMI.  So I started to do a little research.  Based on a Pre Sales Cost Estimate that we did earlier this year, the PMI on the sales price of $323,000 was going to be around $180 a month.  I really hate to have anything on my payment that is unnecessary so I started to research on how we could remove the PMI without putting 20% down.

Just a quick note, if you are not putting 20% down on your house, be sure to have an in-depth conversation with your lender about PMI so that you clearly understand what your options are.  Every lender is different.  With NVR, I am know they give you an option to Pre-Pay your PMI but I have not received all of the details around it.

We are hoping we can save and just Pre-Pay the PMI at closing.

Here is what I learned in general about PMI.
  • PMI - It is put in place to protect the lender in case you default on the loan
  • PMI - It is not removed unless you reach 20% Mortgage to Loan Value or if you Refinance.
  • You can Pre-Pay PMI to remove it from your mortgage upfront - It is typically about 1.75% of the Purchase Price to Pre-Pay and Remove the PMI. So on a $300,000 sale price it would cost around $5,250 to Pre-Pay and remove the PMI.  This is a no-brainer!  Over the life of the loan, you are going to save around $17,000 if you Pre-Pay your PMI upfront!  Other terms used that mean the same as Pre-Pay PMI are Single Pay PMI and Single Premium Insurance.
Here are some helpful sites I used to learn more about PMI.


  1. Didn't FHA change the rules when it comes to PMI and it must continue to be paid for the length of the loan...please correct me if I'm wrong