What Costs Affect the Price of Private Mortgage Insurance?


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The size of a down payment and a buyer's credit score are two factors that impact the price of private mortgage insurance, notes Bankrate. Mortgage insurance reimburses a lender in the case of a default on a loan. If a borrower defaults, then the insurance company pays the lender according to the insurance policy terms, states Zillow.

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A lower credit score generally requires a higher private mortgage insurance premium, notes Zillow. Private mortgage insurance rates vary from year to year, reports Bankrate. Borrowers can either pay private mortgage insurance monthly or as a large upfront payment. This upfront payment can be provided in conjunction with the real estate closing process. Certain circumstances also dictate when a lender must cancel the private mortgage insurance. Borrowers can expedite the cancellation of private mortgage insurance by closely monitoring payments.

Borrowers can purchase private mortgage insurance from the government or from private lenders, explains Zillow. The type of loan determines the appropriate types of mortgage insurance to purchase. If a borrower puts down less than a 20-percent down payment on a property, lenders require the borrower to carry mortgage insurance. Borrowers continue to pay the mortgage insurance until the loan-to-value ratio hits a certain threshold. After reaching this threshold, lenders must automatically cancel the private mortgage insurance requirement.

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