What is PMI (private mortgage insurance)?

When you put less than 20% down towards the purchase of a home, most lenders will require you to carry and pay for PMI on top of your monthly mortgage payments. PMI protects and reimburses your lender in case you default on your mortgage payments.

How much does PMI cost?

Unfortunately, PMI can be a sizeable cost on top of your monthly principal and interest mortgage payments. Costs vary and depend on a number of factors, but generally ranges from 0.5% – 1.5% of your original loan amount each year.

  • On a $400,000 home loan at a 30-year fixed rate of 4.00%, your monthly principal and interest payment is $1,910.
  • Assuming PMI is 1% of your starting loan balance, it would add an $333.33 each month, which is 17% of your principal and interest payment
  • That’s $333.33 that could have used on things like groceries, utilities, books, and tuition payments.
  • Plus, PMI may not be tax deductible.

If there’s any silver lining at all with PMI, it’s that you usually don’t need to carry it for the entire life of your mortgage. Typically, you can request to stop paying PMI once you have at least 20% equity in your home (once your loan balance is 80% or less of your property value).

But why pay PMI at all? With SoFi, you don’t.

We want to accelerate your success, not slow you down. That’s why SoFi offers mortgages with as little as 10% down on loans up to $3 million with no PMI, origination, or lender fees.

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