What is Mortgage Insurance?
Compare Different Loan Types and the Cost of Your Payments
When buying or refinancing a home, you may need to include mortgage insurance as part of your monthly payments. Mortgage insurance protects the lender in case the borrower defaults on the loan. Whether or not you are required to pay for mortgage insurance depends on the type of loan you choose and other factors. Read on to learn more!
Mortgage Insurance for Conventional Loans
For
Conventional mortgages, you may need to pay for
private mortgage insurance (PMI) if your down payment is less than 20%. However, if you put down 20% or more when purchasing a home, PMI is not required.
The cost of PMI is influenced by your credit score and your down payment. It typically ranges between 0.5% and 2% of your mortgage loan amount. Once your home’s equity reaches 20%, you can usually request to have PMI removed.
If you’re refinancing a Conventional loan, PMI will not be required if your home’s equity is at least 20%. Learn more about Conventional loans from
eCash Mortgage.
Mortgage Insurance for FHA Loans
With
FHA loans, both an
upfront mortgage insurance premium and
monthly insurance premiums (MIP) are required, regardless of your down payment amount. The current upfront premium is 1.75% of the loan amount, while the monthly premiums depend on factors like the term of the loan and typically range between 0.15% and 0.75% of the loan amount.
If you refinance an FHA loan, you will also need to pay both the upfront and monthly insurance premiums again. However, if your existing FHA loan was taken out within the past three years, you might be eligible for a partial refund of the previous upfront premium when you refinance. Learn more about FHA loans through
eCash Mortgage.