Private Mortgage Insurance (PMI)
                     Private Mortgage 
Insurance (PMI) | Osprey 
Mortgage Lending
WWW.OSPREYMORTGAGELENDING.COM
What is private mortgage insurance 
(PMI)?
 PMI stands for private mortgage insurance, a type of insurance policy 
that protects the lender if a borrower defaults on a home loan.
 Private mortgage insurance (PMI) is a type of insurance that may be 
required by your mortgage lender if your down payment is less than 20 
per cent of your home’s purchase price. PMI protects the lender against 
losses if you default on your mortgage.
How does PMI work?
 PMI companies write insurance policies to protect approximately the top 
20% of the mortgage against default.
 This depends on the lender's and investor's requirements, the loan-to-
value ratio, and the type of loan program involved.
 Should a default occur the lender will sell the property to liquidate the 
debt, and is reimbursed by the PMI company for any remaining amount 
up to the policy value.
How much does PMI cost?
 PMI costs vary from insurer to insurer, and from plan to plan.
 PMI typically costs 0.5 – 1% of your loan amount per year.
 For example: If you buy a $300,000 home, you would be paying 
anywhere between $1,500 – $3,000 per year in mortgage insurance.
How does the buyer apply for PMI?
Typically the buyer covers the cost of PMI, but the lender is the PMI 
company's client and shops for insurance on behalf of the borrower. 
Lenders usually deal with only a few PMI companies because they know 
the guidelines for those insurers. This can be a problem when one of the 
lender's prime companies turns down a loan because the borrower doesn’t 
fit its risk parameters. A lender might follow suit and deny the loan 
application without consulting a second PMI company, leaving all parties in 
an undesirable position. The lender has the difficult task of being fair to 
the borrower while shopping for the most effective way to lessen liability.
How to avoid PMI?
 You can avoid mortgage insurance altogether by coming up with a 20% 
down payment.
 Though it's certainly a significant amount of funds, you could end up 
saving thousands of dollars by forgoing PMI. Be sure to look into gift 
money for your down payment if you don't see yourself reaching the 
20% mark alone. 
Information source
www.ospreymortgagelending.com