If you are borrowing more than 80% of your house’s value you’ll need to look for a private mortgage insurance quote. Private mortgage insurance is not for you it’s for the lender. The insurance simply covers the costs of the loan if you decide to quit paying. This does not negate you of your financial responsibility so you will still have your credit obliterated when you default. If you want to protect your family mortgage payments in cases of death or disability than you need to buy mortgage protection insurance which is more like life insurance. These two are commonly confused and banks will never insist that you own mortgage protection.
Private Mortgage Insurance Costs
The best private mortgage insurance quote is zero. The only way to get this price is to not need it. There are three options for negating PMI. One is two pay over 20% for your house. Sometimes lenders will try to get you to pay PMI anyways, but there is no need and they will drop the demand as soon as you mention it. They’ll usually blow it off as an accident. The next option is to borrow money from somewhere else to pay the PMI. Be careful with the math because often you’ll pay more on a high interest personal loan or second mortgage than you would with regular PMI. Also, second mortgages tend to have variable rates. This is adding extra risk to your home loan that will only end up stressing you out later. The third option is to have incredibly great credit to convince the mortgage lender that there is no way you’ll default on your loan. If you’re going with option number 3 than you’ll need to work with a smaller local bank because the big banks tend to follow rules and procedures strictly. Which means PMI on all loan to value (LTV) greater than 80%.
If you can’t avoid the PMI then you need to start shopping for a private mortgage insurance quote. The best starting point for negotiations is to know what you’ll pay on average. PMI generally costs about $50 per month per $100,000 you’re borrowing. That is just rule of thumb, but don’t settle with the first offer. As a rule PMI doesn’t depend on credit scores, but only on the value of the mortgage you’re trying to get financed for. In practice this is bunk and every insurance company understands risk. If you have outstanding credit than tout this to the PMI brokers. They know you’ll be much less likely to default and be more willing to negotiate for your business.
The last tactic to reduce your PMI costs is to keep an eye on your LTV. Legally the PMI is supposed to stop automatically when your LTV is less than 78%. This doesn’t happen in practice because the company doesn’t want to know you remodeled or live in the hot new neighborhood. Get your private mortgage insurance quote from companies that did business with people you know. This will reduce the chance of any fight getting the PMI stopped.