You can calculate your LTV ratio by dividing your new mortgage amount by the market value of your home. If you're refinancing your current mortgage, most conventional lenders require an LTV ratio of 80% or less to avoid having to pay for PMI. For refinance loans, your loan-to-value ratio is over 80%.If you can't afford to put down at least 20% on a purchase, you may have to pay for PMI. You can calculate your down payment percentage by dividing the amount you plan to put down by the lesser of the market value or purchase price of the home. Most conventional lenders require a down payment of at least 20% of the purchase price. Lenders may require PMI on certain loans if: You may have to pay for PMI if you're purchasing a house or refinancing your mortgage. However, PMI does offer some benefits to you as the borrower. Paying PMI may help qualify you for a conventional loan that you wouldn't be eligible for under other circumstances. If you default on your mortgage, PMI pays part of the remaining balance of the loan to the lender. However, PMI can help lower the risk that some mortgages bring.Īlthough you pay for PMI as the borrower, this insurance doesn't protect you. Lenders always accept some level of risk with mortgages. PMI is a type of insurance that lenders require for certain mortgages with high LTV ratios. Find out when you have to pay PMI and learn how to calculate the cost. When do you have to pay private mortgage insurance (PMI) and how much will it cost you? It depends on your loan-to-value (LTV) ratio. When you take out a home loan or refinance your mortgage, your lender may require you to pay for an additional type of insurance – private mortgage insurance.
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