Step by Step Mortgage Guide

Understanding Private Mortgage Insurance

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Private Mortgage Insurance (PMI) is required when the borrow puts down less than 20% of the loan as a down payment. PMI protects the lender from the borrow defaulting on the loan and also allows the borrower to receive a lower rate. Here are common questions about PMI.

How much is Private Mortgage Insurance?

PMI is typically .005% or $5 a year for every $1,000 borrowed.

A $350,000 loan would have a payment of $145.80 a month for PMI.

How long do I pay Private Mortgage Insurance?

Typical individuals make PMI payments until they have paid 20% of the principal. (Keep track as you may have to inform your lender that you have reached this amount and that PMI payments are no longer needed.)

Individuals who have a high debt to income ratio, FHA loans, or other types of high risk borrowers maybe required to make PMI payments up to 50% of the principal.

Is PMI tax deductible?

No, however a mortgage lender may provide the option of making a higher interest payment so the borrower can deduct the additional interest.

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