How much is PMI?
PMI fees will vary according to your location, the amount of your down payment, and your credit score. In general, PMI fees range from 0.3% to 1.5% of the original loan value per year.2 For example, if you buy a $200,000 house and can't afford to put 20% down, you might pay between $600 and $3,000 per year in PMI (or between $50 and $250 per month). Once you have at least 20% equity in your home3 — that is, the outstanding loan balance is no more than 80% of the home's current value — you can request that your lender cancel the PMI requirement. Most buyers only pay PMI for the first five to seven years of the loan.
How to pay for PMI
You pay for PMI as part of your monthly escrow payment. That means in addition to paying your property taxes and homeowner's insurance into your escrow account, you also pay your monthly PMI fee into the escrow account as well. Because the escrow payment is combined with your regular monthly mortgage payment, you only have to make one house payment each month.
How to avoid paying for PMI
You can avoid paying for PMI by making a down payment of at least 20% of the home's purchase price. If that's not possible, there are other ways to avoid PMI. For example, some buyers opt for a "piggyback" loan.4 In this situation, the buyer takes out a second mortgage or home equity loan at the same time as the first mortgage. The first mortgage covers 80% of the purchase price of the home, the "piggyback" loan covers 10%, and the buyer pays the remaining 10% as a down payment (this is also known as an 80-10-10 loan). You can also do a piggyback loan with a larger down payment, so that the first loan covers 80%, the second loan covers 5%, and you pay the remaining 15% down (80-5-15 loan). Talk with your lender about these options. Or, if you don't have a lender, feel free to contact a Synovus mortgage specialist near you.