If you make a down payment on your home of less than 20 percent of the loan, your lender may require you to pay private mortgage insurance (PMI). PMI isn’t necessary for all loan types, but it serves to insure a percentage of your property’s value. This protects your lender in the event foreclosure becomes necessary.

The Cost of the Home

The amount you pay for your home is the biggest factor that contributes to your monthly PMI cost. Because you must pay to insure a percentage of the loan, the more expensive the property, the higher your monthly PMI payments will be.

How Long You’ve Owned the Home

Your PMI payments change over time. PMI is typically higher on recent mortgage purchases. Over time, your PMI costs will decrease until PMI is no longer required.

The Value of the Home

The value of the property directly affects your PMI. Even if you don’t put 20 percent down on your home, your property value may increase over time. Should this occur and if you can prove the increase to your lender via an appraisal, you may have your PMI removed early.

Frequency of Payments

Some homeowners opt to pay PMI once each year or bi-annually into an escrow account. This prevents a homeowner from needing to add PMI costs to his monthly mortgage payment but results in higher costs. The more frequently you pay your PMI, the less you’ll need to pay each time.

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