Mortgage Insurance Guide

What is Mortgage Insurance?

Mortgage insurance protects lenders against losses if a borrower defaults on their loan. It's typically required when you make a down payment less than 20% on a conventional loan, or when you get an FHA loan.

Types of Mortgage Insurance

Private Mortgage Insurance (PMI)

• Required for conventional loans with less than 20% down
• Multiple payment options available
• Can be cancelled when reaching 20% equity
• Automatically terminates at 22% equity

FHA Mortgage Insurance Premium (MIP)

• Required for all FHA loans
• Upfront premium plus annual premium
• Typically required for the life of the loan
• Can only be removed by refinancing to conventional

USDA Mortgage Insurance

• Required for USDA loans
• Lower costs than FHA or conventional
• Upfront guarantee fee plus annual fee

Mortgage Insurance Costs

Factors affecting mortgage insurance costs include:

• Down payment amount
• Credit score
• Loan type
• Loan amount
• Loan term

Annual PMI typically ranges from 0.5% to 1.5% of your loan amount, while FHA MIP ranges from 0.45% to 1.05% annually.

How to Avoid or Remove Mortgage Insurance

Avoiding Mortgage Insurance

• Make a 20% down payment
• Use a piggyback loan (80-10-10)
• Choose a VA loan if eligible
• Explore lender-paid mortgage insurance

Removing PMI

1. Track your loan balance and home value
2. Request removal at 20% equity
3. Get a new appraisal if home value has increased
4. Refinance to a conventional loan (for FHA MIP)

Common Questions

Is mortgage insurance tax deductible?

Mortgage insurance premiums may be tax deductible, depending on your income and current tax laws. Consult a tax professional for specific advice.

Can I refuse mortgage insurance?

If your down payment is less than 20% on a conventional loan, or you're getting an FHA loan, mortgage insurance is typically required. However, you can explore alternatives like piggyback loans or making a larger down payment.

How long do I need to pay mortgage insurance?

For conventional loans, PMI can be removed once you reach 20% equity. FHA loans typically require MIP for the life of the loan unless you refinance to a conventional loan.