I have lived in my home for 5 years and am in the
process of selling it. I had to buy PMI insurance because I did not
have 20% down. Am I entitled to any type of refund once I sell the
Entitlement to a refund and the amount would depend on the
mortgage insurance plan type and the refundable or
non-refundable/limited option chosen at origination. Your best
bet is to ask your lender directly, as there are many
different mortgage insurance plans and combinations.
I think banks are being very greedy in demanding a
secured loan plus PMI and still wanting a perfect credit rating for
7 years. My husband and I are trying to buy a home. We have a good
credit rating, but not perfect credit for 7 whole years. If you
guarantee the loan, what is their problem in granting it?
Mortgage insurance does not guarantee the loan, it only
insures a designated portion (commonly only 12-30%) of the loan
against default. The combinations of loan characteristics (credit,
collateral, MI, etc.) are established as requirements by investors. Loans usually end up in mortgage backed securities. The mortgage
securities may be purchased by investors, for example to go into
Individual Retirement Accounts (IRA's), 401K plans, etc. The
investment funds for IRAs, 401Ks, etc., have risk and
return requirements which ultimately dictate the loan
If mortgage insurance is canceled, are any pre-paid
premium amounts refunded (particularly if they were originally paid
by adding them to the loan amount)?
If all the mortgage insurance was financed at the time of
origination and is canceled prior to it's maturity you may be
entitled to a refund if the refundable option was chosen at time of
origination. However, if the no refund/limited option was
chosen no refund is due.
If a borrower currently has an FHA loan w/MI, after the
LTV has reached 80% or less can the MI be canceled?
It is best to refer back your lender for specific
information on FHA loans. PMI Mortgage Insurance Co. does not insure
FHA loans and therefore can not respond regarding FHA policies.
Can you give an example of how the mortgage insurance
escrow's get applied to the payment?
Your lender collects moneys on escrow and remits to PMI
when the premium is due. Typically, on an annual premium plan, the
lender collects 14 months premium at closing. Twelve months of the
premium is paid to PMI as the initial premium. The remaining two
months is used to start the escrow account. The lender then collects
1/12 of the renewal every month thereafter. It is hard to give a
general rule on a monthly premium plan. The plan was developed
in 1994 and lenders have developed unique escrow
Premise: Mortgage insurance covers the lender for the
difference between the loan amount and 80% value of the property. So
for a borrower who puts 10% down, in effect mortgage insurance
covers the 10% difference. What are approximate rates in premium say
per $1000 dollars? Does credit history have a bearing on the
premium? Can the borrower negotiate the premium?
PMI actually covers the lender for a percentage they
designate. The percent of coverage is usually driven by the
investor's (often, Fannie Mae or Freddie Mac) requirements. Therefore, the approximate premium per $1000 varies based on the
required coverage. The premium is fixed based on plan type (loan to
value, loan type, loan term, etc.) and not related to individual
borrower characteristics. Therefore, the premium is not
Are mortgage lenders supposed to provide borrowers with
information on the conditions when they can cancel mortgage
insurance? Are these conditions supposed to be in the loan
documentation? If the borrower pays mortgage insurance monthly, and
his equity goes up, should his premiums go down? Is the mortgage
lender supposed to notify the borrower when he reaches 20% equity?
Which states have laws on this subject? Can the borrower choose the
mortgage insurance company or does the lender do that?
Because of the wide variation in lender, investor and
state requirements, it is necessary to consult your lender on these
questions. Keep in mind when considering mortgage insurance
issues that the lender is the insured, not the borrower.
Would mortgage insurance be of use to lenders to help
approve loans for higher risk (i.e. self employed) individuals?
PMI does insure loans made by lenders to self employed
borrowers. However, it is unlikely that our coverage would have any
effect on the lender's ability to offer such loans. Generally,
mortgage insurance is required due to low down payment
and associated risk and not related to borrower credit
characteristics or history.
Does mortgage insurance apply for investor properties?
PMI only insures loans on owner occupied residential
properties (1 to 4 units).
What is private mortgage insurance?
Mortgage insurance is a type of insurance that helps
protect lenders against losses due to foreclosure. This
protection is provided by private mortgage insurance
companies, such as PMI Mortgage Insurance Co., and
allows lenders to accept lower down payments than would
normally be allowed.
Mortgage insurance also enables lenders to grant loans
that would otherwise be considered too risky to be purchased by
third party investors like the Federal National Mortgage Association
(FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).
The ability to sell loans to these investors is critical
to maintaining mortgage market liquidity, which in turn,
allows lenders to continue originating new loans.
Is private mortgage insurance different from other
kinds of insurance associated with mortgages?
Private mortgage insurance protects the lender in the
event of borrower default and subsequent foreclosure on the home. FHA and VA insurance also protect the lender against borrower
default under a government program rather than through the private
Credit insurance, sometimes called mortgage insurance, is
life insurance coverage that pays off the mortgage in the event a
borrower dies, becomes disabled, or incurs loss of health or income.
Fire, liability, and theft insurance cover the homeowner
from losses according to the terms and conditions of
their respective insurance policies.
How small can my down payment be?
Private mortgage insurance makes it possible for a home
buyer to obtain a mortgage with a down payment as low as 5% and for
low-to-moderate income home buyers as low as 3%. Such
mortgages are popular today because potential home
buyers are not able to accumulate the 20% down payment
that is generally required by lenders if a loan is not
Who pays for mortgage insurance?
The lender does, although they will generally pass that
cost on to the borrower. Typically, a portion of the mortgage
insurance premium is paid up front at closing, and the
rest is paid as part of the monthly mortgage payment.
What are the payment options for mortgage insurance?
Private mortgage insurance can be paid on either an
annual, monthly or single premium plan. Premiums are based on
the amount and terms of the mortgage and will vary
according to loan-to- value ratio, type of loan, and
amount of coverage required by the lender.
Under an annual plan,
an initial one year premium is collected up front at
closing, with monthly payments collected along with the
mortgage payment each month thereafter. Monthly
plans allow a borrower to pay the lender only 1 or 2 months
worth of premium at closing, and then on a monthly basis along with
the regular mortgage payment. Under a single premium plan,
the entire premium covering several years is paid in a lump sum at
closing. Typically, home buyers choose to add the amount of the
lender's mortgage insurance premium to the loan amount. By doing
this, home buyers can reduce their closing costs and increase their
interest deduction. PMI Mortgage Insurance Co. offers a
single premium plan called Super Single.
Below are examples of how a variety of PMI Mortgage
Insurance Co. premium plans could effect your mortgage payments:
Annual Monthly Super Single
Plan Premium (financed)
Loan Amount(*) $150,000 $150,000 $150,000
Cash for MI at closing $ 750 $ 56 $ -0-
Financed Premium $ -0- $ -0- $ 3,000
Total mortgage amount $150,000 $150,000 $153,000
Monthly P&I(**) $ 1,317 $ 1,317 $ 1,343
MI Renewal $ 43 $ 56 $ -0-
P&I plus monthly MI $ 1,360 $ 1,373 $ 1,343
(*)Loan amount of $150,000; 10% down payment; 30 year fixed rate
loan at 10% interest.
(**)P&I stands for monthly Principal and Interest on the mortgage.
Can mortgage insurance coverage be canceled?
Mortgage insurance is maintained at the option of the
current owner of the mortgage. In many cases, the lender will allow
cancellation of mortgage insurance when the loan is paid down to 80%
of the original property value. However, the degree of equity in the
home is not the only factor that a lender may take into
consideration. Note that the law in certain states requires
that mortgage insurance be canceled under some
How does private mortgage insurance differ from FHA
Although the insurance protection concept is similar,
there are differences between private mortgage insurance and FHA. FHA insurance is a government-administered mortgage insurance
program that does have certain restrictions. FHA has maximum
regional loan limits that are lower than those with private mortgage
insurance. FHA may be more expensive, takes longer to receive
approval, and has fewer payment plan options. FHA insurance lasts
for the life of the loan, unlike private mortgage insurance which is
cancelable in most circumstances. FHA is a good choice for some
borrowers with credit history problems that might need special