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Private mortgage insurance is an insurance required by lenders of mortgages from mortgagors as part of the mortgage deal if they are borrowing more than 80% of the value of their intending new home. This insurance has become necessary especially in recent times due to the increasing number of foreclosures being witnessed in the home and real estate sector of the economy.

So if you are wondering how much is private mortgage insurance, you don’t need to wonder anymore. Private mortgage insurance is calculated based on several factors. This simply means that what Mr. ‘X’ pays is quite different from what Mr. ‘Y’ is going to pay. Also the supplier of the funds has a significant part to play in this scenario. Having said that, to calculate private mortgage insurance, first determine the down payment. For a down payment of 10%, the amount of finance required is 90%. Now find out the fixed rate loan; this rate varies depending on the number of years of the mortgage. For instance, on a home of $200,000, with a down payment of $20,000 (10%) and fixed rate loan of 0.80% for 30 years, the monthly mortgage payments will be the value of the property less the down payment ($200,000 – $20,000) multiplied by the fixed rate loan (0.008) all divided by 12 months which will result in monthly payments of $120.

From the year 2006, the Congress passed the Homeowners Protection Act; this Act stipulates automatic cancellation for private mortgage insurance if the holder of the mortgage pays up to 22% of the value of the home. This means that if the mortgagor has paid up to 22% of the value of the house, and the mortgagee fails to cancel the private mortgage insurance, then he has fallen foul of the Act and can be punished. The Act stipulates fines of up to $25,000 for individuals and $100,000 for corporations for offenses relating to the Act. The Act also mandates the lender to inform the borrower of all his options and relevant information regarding the mortgage.

However, the borrower can on his own request for cancellation of the mortgage on paying up to 20% value of the property. This request can also be granted if the loan is not considered a high risk loan. High risk loans are mortgages where the borrower fails to make payments as at when due.

Private mortgage insurance adds to the cost of the property and for this reason, homeowners usually resent it; however, it provides a veritable opportunity for those who ordinarily could not afford 20% value on their property to put down only 3% value of the property and begin to enjoy the American dream. Remember, it is important to factor in how much is private mortgage insurance when calculating your mortgage for it also forms part of the cost for the property.