What is a mortgage insurance premium? Do I need this?

Q: What is a mortgage insurance premium? Do I need this?

A: If you are looking at your mortgage bill or statement, you may see a charge for a "mortgage insurance premium." In general, this will be the cost you must pay for a policy which helps to protect your mortgage lender against any loss which may occur if you don't make the payments on your loan.

All loans where the borrower has less than a 20 percent down payment or a 20 percent equity stake must have mortgage insurance in order to be eligible to be backed by Fannie Mae or Freddie Mac. Policies attached to these mortgages are often called Private Mortgage Insurance (PMI), since private companies issue the policies. The FHA also has mortgage insurance, but is a self-insuring pool, and all borrowers must contribute an up-front premium as well as regular premiums.

There is a kind of debt or "mortgage life" insurance which is sometimes confused with MI. These are policies which pay part of or even all of the mortgage if you become unemployed, injured or should pass away.

These are voluntary policies, and they would be added on to your mortgage payment in addition to any MI you are required to pay.

Ask the expert
Keith Gumbinger
Keith Gumbinger
Mortgage Expert
Vice President, HSH.com
About Keith: Mortgage market observer and analyst with 35 years experience... (more)
Submitting your question...

Question received! Check back later to see if your
question gets published.

Q: How many times can I use my VA home loan?
OCT 31, 2019

There are three ways you can restore your VA eligibility so that you can take advantage of it more than once.

Read More
Q: Can my lender ask me why I'm buying a specific home?
NOV 06, 2018

Lenders can ask you why you are buying a specific home because there are different lending rules for different types of properties.

Read More
Q: Does the VA allow "asset depletion" mortgages?
SEP 20, 2018

Can you use private-sector retirement income and savings to help qualify for a VA-backed mortgage?

Read More