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At Mortgage Depot, we understand that some buyers struggle to come up with the money for a down payment, so we work with lenders offering reduced down payment requirements for loans with private mortgage insurance. PMI allows buyers to qualify for a mortgage with a lower down payment, but no one wants to pay a monthly fee for PMI if it can be avoided. Mortgage Depot is a mortgage broker, so we work with different lenders offering alternatives to PMI.

What is mortgage insurance?

Most lenders require borrowers to put down at least 20% of the purchase price of a home. Mortgage insurance was developed to give borrowers who could not save enough money for a 20% down payment the chance to purchase a home.

PMI is a policy of insurance that pays a lender in the event a borrower defaults in making payments on the mortgage. The monthly cost of PMI depends upon the following factors:

  • Amount of the down payment
  • Borrower’s credit score
  • Loan-to-value ratio

How long it will take a borrower to payback a loan is also a factor in determining the cost of PMI. The PMI for a 15-year mortgage will be less than a mortgage that will take 30 years to payback.

Avoiding PMI

The easiest way for a borrower to avoid the cost of mortgage insurance is by putting down at least 20%, but we know that is not an option for many people. Mortgage Depot has lenders offering an alternative to PMI through a piggyback mortgage.

Piggyback financing involves a first mortgage for 80% of the purchase price and a second mortgage equivalent to 10% of the price of the home. The buyer’s down payment using this method of financing is reduced to 10% of the purchase price, and both loans close at the same time to complete the transaction.

Contact Mortgage Depot

Speak to one of our loan officers about alternatives to mortgage insurance.

To contact us by phone call 800-535-0270 or email us by clicking here.

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