| What is PMI or Private Mortgage Insurance? |
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Private mortgage insurance covers lender in case of loss due to default on a mortgage by the borrower. If the lender requires mortgage insurance on a particular mortgage, the loan package is sent to the private mortgage insurance company for an approval. The borrower is responsible for paying for the monthly mortgage insurance payments. Typically, the mortgages with loan-to-value(LTV) ratio of more than 80% require mortgage insurance.
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| How much does mortgage insurance cost? |
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The amount of mortgage insurance one pays depends on the loan amount, type of mortgage and the amount of down payment. At closing of the transaction, you may have to pay a couple of months worth of payments in advance.
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| Do I continue paying mortgage insurance over the entire life of the loan? |
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Not necessary! When you think you have more than 20% of equity, you can apply for canceling mortgage insurance policy. Depending on the appraised value of your home at that time and your payment history, the lender will make a decision.
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