How Much Will PMI Cost – PMI is a policy that comes with different costs, depending on how much you put down. For example, if your down payment is less than 20 percent, the lender will get the insurance in case you don’t make the house payments. This doesn’t mean you can blow off making your house payments — if you fail to pay, the bank will still foreclose on your house.
The insurance company will pay the bank the difference between 20% and the amount you actually put down. If you put down 5% and default, the insurance company pays the bank the other 15% that you didn’t pay.
The bank and their cost gets protected as you pay for their overall PMI protection. This is how you’re able to buy a home for less than 20 percent down. However, much of the banks today aren’t using the insurance since the economic crises of 2008.
This means that you might have to put more down on a house. In addition, the credit approval process for a mortgage is also difficult if you have a lower credit score of 700. It really depends on the financial institution, and they all have different policies.
You can also cancel PMI is you made enough payments. You must first own about 20 percent of it before you can cancel it. This is another monthly cost you can eliminate if you make additional payments on your mortgage.