Information on Private Mortgage Insurance on South Bay home loans. Find out what private mortgage insurance (PMI) is and whether it will be required by your lender when you buy a home in the South Bay. Find current South Bay homes for sale, Realtors®, and current home values in Southern California's South Bay. Find real estate listings with our free home search and South Bay MLS access, open houses, real estate agents, and our South Bay Brokers listings. Our free real estate services feature all South Bay cities and neighborhoods including Manhattan Beach, Hermosa Beach, Redondo Beach, Torrance, El Segundo, Hollywood Riviera, Hawthorne, Hollyglen, and Palos Verdes.  
 
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What is Private Mortgage Insurance? (PMI)

Private Mortgage Insurance (PMI) is default insurance on mortgage loans, provided by private insurance companies. PMI allows borrowers to obtain a mortgage without having to provide 20% down payment, by covering the lender for the added risk of a high loan-to-value (LTV) mortgage. The Homeowners Protection Act of 1998 requires PMI to be canceled when the amount owed reaches a certain level, particularly when the loan balance is 78 percent of the home's purchase price. Often, PMI can be cancelled earlier by submitting a new appraisal showing that the loan balance is less than 80% of the home's value due to appreciation (this generally requires two years of on-time payments first) Different terms:Mortgagee's Title Insurance is a policy that protects the lender from future claims to ownership of the mortgaged property. Generally required by the lender as a condition of making a mortgage. In the event of a successful ownership claim from someone other than the mortgagor, the insurance company compensates the lender for any consequent losses. Mortgagor's Title Insurance is a policy protecting the buyer/ owner of real property from successful claims of ownership interest to the property. The coverage usually is supplemental to a Mortgagee's Title Insurance policy, and the premium is customarily paid by the buyer.

Features of Private Mortgage Insurance:

  • The PMI charges depend on the amount of down payment and loan to value ratio.
  • The mortgage insurance premiums are tax-deductible.
  • A part of the private mortgage insurance premium is paid at closing and the rest is included in the monthly mortgage payment.
  • A borrower has to pay these insurance premiums until the home equity increases to 80% of the property value. But in case of mortgages insured by the Federal Housing Administration, the private mortgage insurance is to be paid throughout the loan term.

Benefits of Private Mortgage Insurance:

  • Private mortgage insurance helps a borrower to take a mortgage with a down payment as low as 3% or 5%.
  • It helps lenders from losses in case the borrower fails to make monthly payments on the mortgage.

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