Here at Carolinas Telco Federal Credit Union, we think the best financial decision is an empowered one, making it impossible to have Too Much Information (TMI) on things that affect your borrowing and finances, like PMI or MIP.
So, what is PMI?
PMI stands for Private Mortgage Insurance, a type of insurance that protects the lender if you stop making payments on your conventional mortgage. This type of insurance is usually required if making a down payment of less than 20% of the home’s purchase price. Commonly, PMI is paid as a monthly premium added to your mortgage payment.
This figure is commonly found in the loan estimate you receive when applying for a mortgage. Once you agree to your Mortgage, your PMI Monthly Premium will also be included on the closing disclosure under projected payments.
Sometimes, PMI can be paid with a one-time upfront premium paid at closing. If you plan to move or refinance shortly after closing, this option isn’t recommended because you would not be entitled to a pro-rated refund of the upfront cost. Another option available would be a combination of Upfront PMI and Monthly premiums. Ask a loan officer to help you calculate total costs in timeframes personalized to you.
Why get PMI?
While it could increase the total cost of your loan, it may also help you qualify for a loan you may otherwise not be able to get. In addition to making more loan options accessible to you, Private Mortgage Insurance can lower your interest rate even with a lower down payment. You may even be able to cancel monthly mortgage premiums once you’ve accumulated a certain amount of equity in your home.
When Can you cancel PMI?
Usually, PMI can be removed by contacting your lender once 20% equity is reached. Otherwise, it will be automatically canceled once 22% equity is reached in most cases.
What is MIP?
Mortgage Insurance Premium or MIP is insurance paid by homeowners who take out loans backed by the Federal Housing Administration (FHA). MIP can be paid in two ways: Upfront Mortgage Insurance Premium (UFMIP) or as an annual premium payment (Annual MIP). UFMIP can be financed into your loan amount, while Annual MIP is included in your monthly mortgage payment.
Can MIP be canceled?
In contrast to PMI, Mortgage Insurance Premium cannot be canceled unless you made a larger than average down payment or refinance into a conventional loan once you reach 20% equity.
How does MIP or PMI affect my Loan costs?
This varies by loan and individual loan terms. Contact a Mortgage Specialist today to help you calculate the total costs in timeframes that are personalized to you.
Contact Us Today!
Since 1934, Carolinas Telco Federal Credit Union has provided our members with the financial tools they need to accomplish their personal goals. If you are interested in learning more about how a Mortgage could benefit you, let’s get started! Contact our Mortgage Loan Officer (MLO) at 704-395-5849, email us at [email protected], or visit ctelco.org/mortgages.