What Is Private Mortgage Insurance?

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Private mortgage insurance is added onto a loan when the borrower cannot provide a 20-percent down payment, as the lender takes a higher risk in this situation. Pay private mortgage insurance when making a small down payment with tips from a mortgage broker in this free video on mortgage loans.

Part of the Video Series: Mortgage Tips & Information
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Video Transcript

Hi this is Matt McKillen with Innovative Financial Group. The question posed to me today is what is private mortgage insurance? Private mortgage insurance is a insurance policy or premium that's included in your loan whenever you refinance or purchase a home with less than 20% down. For example if you buy a house and you're only putting 5% down, your PMI payment or your private mortgage insurance payment will be included in your escrow because the bank's taking a higher risk by lending you that mortgage with not 20% down. The less you put down the higher the PMI insurance payment is. For example if you put 10 or 15% down, the PMI payment in your escrow would actually be quite less. So what it is it's an insurance policy that covers the bank in the event of a loss on your loan for that additional amount they advanced over the traditional 80% LTV. Again my name is Matt McKillen, I'm with Innovative Financial Group.

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