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#454338 - 09/07/16 09:20 PM Private Mortgage Insurance (PMI) & Mortgage Insurance Premium (MIP)
MaShe Offline
Junior Member

Registered: 07/28/16
Posts: 5
Loc: Hawaii
I am a little confused with these two terms Private Mortgage Insurance (PMI) & Mortgage Insurance Premium (MIP)...

What is the difference between the two?

Is my understanding correct that if you're putting less than 20% down, some form of Private Mortgage Insurance (PMI) will usually be required. I am assuming that this is a monthly charge.
And some Lenders will exact a large one-time Premium from you up front at Closing and that is the Mortgage Insurance Premium (MIP)???

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#454344 - 09/08/16 05:44 AM Re: Private Mortgage Insurance (PMI) & Mortgage Insurance Premium (MIP) [Re: MaShe]
Vermont Offline
Major Contributor

Registered: 04/12/08
Posts: 7792
Loc: Vermont's North-East Kingdom
Your understanding is fairly accurate; most PMI carriers (like AIG, MGIC, and GECC) have adopted the monthly premium model because very few buyers had that sum of money up front to make an advance one-time premium payment PLUS the buyer would never see the unearned portion if they sold their home before the mortgage matured.

Even loans guaranteed in the Public Sector like VA, USDA, and FHA usually have an insurance charge built in. The VA insured loans are paid by the taxpayers (the US Gov't) and not seen by the mortgagor, but the USDA Insurance Insurance Premium is often loaded right into the amount of the mortgage upfront for the buyer to pay; and I don't think there's any provision for stopping it when you accumulate more that 20% equity.

This reminds me that I once had a conventional loan where the lender insisted that I prove 30% equity before they'd allow me to cancel my PMI; but that was nearly 40 years ago, so I don't know if the Lenders continue to have kind of local discretion today.
_________________________
Dale C. Hittle of GOLDEN RULE PROPERTIES in Glover, Vermont
Where We're Always Striving To Put Together "THE FAIR DEAL"

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