Tips & Tricks

3 Things You Should Know About Private Mortgage Insurance

Depending on your financial situation when purchasing a home, you may have to pay private mortgage insurance. Especially if this is your first time considering buying a home, you may not have ever even heard of this additional cost before. But for many home buyers, private mortgage insurance is a fee that’s included in your overall mortgage payment as a way to help the bank minimize risk when lending to you. So if you’re about to buy a home and aren’t sure about this cost you’re seeing, here are three things you should know about private mortgage insurance.

Who Needs Private Mortgage Insurance

Not everyone who’s buying a home will be required to pay the costs for private mortgage insurance. According to Amy Fontinelle, a contributor to, generally anyone who’s not putting down at least 20 percent for a down payment will be required to pay private mortgage insurance. This is done because home buyers who offer larger down payments up front often feel more invested in their homes. If you’re not paying a large enough down payment, your lender wants to help minimize their own risk in lending you the money, so they charge you this additional fee to help balance this out.

The Actual Amount Can Vary

The actual cost of your private mortgage insurance will depend on a few variables. Not only will the price of your home be an indicator, but John Csiszar, a contributor to, shares that your credit score can also either help or hurt you in this instance. Generally, you can expect your private mortgage insurance to be somewhere between 0.3 and 1.15 percent of your home loan. However, your credit score and how much you’ve added for the down payment are also taken into consideration when calculating what your private mortgage insurance cost will be.

When Private Mortgage Insurance Ends

Luckily, the amount you’re paying for the private mortgage insurance won’t stay on your monthly bills for the entirety of your mortgage payment. According to Emily Richey, a contributor to, you only have to pay your private mortgage insurance until you’ve reached 20 percent equity in your home. Keep in mind that this 20 percent equity applies to the amount you took out for your home loan, not the market value of your home. While things can vary depending on your lender and your particular circumstances, the rule of your private mortgage insurance ending at a certain point is standard.

If you’re about to buy a home and don’t plan to have at least 20 percent ready for a down payment, consider how the costs of private mortgage insurance could affect your financial plan for the future.

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