Private Mortgage Insurance helps you get the loan


Private Mortgage Insurance, also known as MI, is a supplemental insurance policy you may be required to obtain in order to get a mortgage loan. MI is provided by private (non-government) companies and is usually required when your loan-to-value ratio — the amount of your mortgage loan divided by the value of your home — is greater than 80 percent.
MI isn't a bad thing — it allows you to make a lower down payment and still qualify for a mortgage loan. In fact without MI, many of us would not be able to purchase our first home.


How is MI calculated?


Your MI premium is fixed based on your total loan-to-value ratio and credit score and other individual characteristics. MI typically amounts to about one-half of 1% of your mortgage amount annually, according to the Mortgage Bankers Association, and the premium payment is usually rolled into your monthly mortgage payment.

The lower your credit score and down payment, the higher the MI or interest rate.

On a $200,000 mortgage, you may be paying $1,000 per year for MI. MI is not tax-deductible.

Are there various types of MI?

MI has several categories; borrower paid monthly(BPMI) or lender paid(LPMI); lender paid is rolled into the rate so you do not have to pay monthly but a higher rate instead. Sometimes it is cheaper to have a higher rate and no MI then it is to have a lower rate with MI.

What Is Mortgage Insurance?