At MortgageDepot, 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.

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