What is mortgage insurance?
Mortgage insurance (MI) protects a lender against the risk of a borrower defaulting on a loan.
Are there different kinds of mortgage insurance?
Yes. Government-issued MI is for loans insured by the Federal housing Authority (FHA). Private mortgage insurance (PMI) is issued on conventional loans by private insurance companies.
When is MI required?
MI is typically required on all conventional loans with a down payment of less than 20 percent, or less than 20-percent equity. The majority of FHA loans require MI.
When can I cancel my FHA-issued MI?
FHA loans now carry MI for the duration of the loan, the only way to avoid the monthly payments is to refinance into a conventional loan when you are eligible.
When can I cancel my monthly MI?
Borrowers can request that their MI be cancelled when they reach a 20-percent equity stake (verified by an appraisal) in their home, in most cases, MI is cancelled automatically when the loan reaches 78 percent of the original appraise value.
What plans are available for paying MI?
MI can be paid in a variety of ways. In a single, up front premium paid with cash, in a single premium that is financed into the loan; as a monthly amount; or, as a combination of a monthly amount and an upfront premium.
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