|
What is Private Mortgage Insurance? |
|
|
|
|
If you have a conventional loan and make less than a 20 percent downpayment, you must buy private mortgage insurance. This premium is usually paid monthly and the servicer of the loan must notify you annually, beginning 24 months after your loan was completed. Payment of PMI is released when the owner gains 20 percent equity in their home, or when the loan is seven years old, whichever comes first. FHA loans include a mortgage insurance premium of 2-1/4 percent of the total loan amount for a 30 year loan. The premium is 2 percent on a 15-year FHA loan. The insurance can be paid when you close on your home or pay it as part of your monthly payments. There is also an annual fee of 1/2 percent of the loan amount in monthly installments. The lower the downpayment, the longer the fee will have to be paid. MIP cannot be cancelled under Minnesota's private mortgage insurance cancellation law.
|
