Understanding the Difference Between PMI and BPMI When you’re in the market for a mortgage, you might come across the terms PMI and BPMI.

Knowing the difference between these can help you make informed decisions about your home financing.

PMI (Private Mortgage Insurance):

• What It Is: PMI is insurance that protects the lender if you stop making payments on your loan. It’s typically required if your down payment is less than 20% of the home’s purchase price.

• How It Works: PMI is arranged by your lender and provided by private insurance companies. It adds an extra cost to your monthly mortgage payment.

• Cancellation: You can request to cancel PMI once your loan balance reaches 80% of the home’s original value. Lenders are required to automatically terminate PMI when the loan balance drops to 78%. BPMI (Borrower-Paid Mortgage Insurance):

• What It Is: BPMI is a type of PMI where the borrower directly pays the insurance premium.

• How It Works: BPMI is added to your monthly mortgage payment, just like traditional PMI. However, some lenders may offer options to pay the BPMI upfront as a single premium or in a combination of upfront and monthly payments.

• Cancellation: Similar to PMI, BPMI can be cancelled when you reach 20% equity in your home. You’ll need to request cancellation, and it’s automatically terminated when you reach 22% equity. Key Differences:

• Payment Structure: PMI is typically included in your mortgage payment by the lender, while BPMI may offer more flexible payment options.

• Control Over Payments: BPMI gives borrowers more control over how they pay for their mortgage insurance, potentially saving money in the long run.

Why It Matters:

Understanding the differences between PMI and BPMI can help you choose the right mortgage insurance option for your financial situation. Both options protect the lender but offer different payment structures and cancellation processes.

Need More Info?

Contact us today to discuss which mortgage insurance option is best for you.

Our team is here to guide you through the process and help you make the best decision for your home financing needs.