Private Mortgage Insurance FAQs

As of January 20, 2022

Q. What is private mortgage insurance?

A. Private mortgage insurance, or PMI, is an insurance product that protects lenders against

financial losses when a homeowner stops paying on a loan. PMI may be required by the

lender for certain borrowers – in general, those putting less than 20% of the purchase price

down on the property. PMI helps your lender recoup some of the balance of the loan if you

default on the loan and the house is sold for less than amount of the loan. Although PMI

protects your lender, not you, you as the buyer must pay the premium. The PMI premium is

usually included in your monthly mortgage payment.

Q. Why is my lender requiring me to purchase PMI?

A. If your down payment on a property is less than 20% of the purchase price, the lender will

usually require PMI. If you are refinancing with a conventional loan and your equity is less

than 20% of the value of your home, your lender may also require Private Mortgage

Insurance.

Q. If the buyer is putting down more than 20%, can they ever be required to purchase

PMI?

A. Possibly. Some lenders may have other requirements, and if you are purchasing a property

with more than 20% down but your credit isn’t very good, you may still be required to pay

PMI.

Q. If the buyer pays down the loan over a number of years and the Loan to Value drops

below the amount requiring PMI, will the PMI be canceled?

A. It can be in many circumstances. Loan to Value is the percentage of money borrowed

compared to the value or sale price of your home. For example, if you put ten percent down

on your property but now realize you have paid off over 20% of the purchase price, it’s worth

checking with your lender to see if your PMI can be dropped. Depending upon the terms of

the loan, it may be possible. If your loan is a VA or FHA loan, you will be required to pay the

mortgage insurance for the term of the loan.

Q. Does the Maryland Insurance Administration oversee PMI companies?

A. As with other types of insurance, the Maryland Insurance Administration does regulate

insurers who sell PMI. All policy forms, premium rates and financial statements must be filed

and approved by the Maryland Insurance Administration.

200 St. Paul Place, Suite 2700, Baltimore, Maryland 21202

Direct Dial: 410-468-2000 Fax: 410-468-2020

1-800-492-6116 TTY: 1-800-735-2258