What is Mortgage Insurance in South Carolina?
Mortgage insurance can be required if you take out a traditional mortgage loan in South Carolina. This insurance, also known as PMI for short, protects the lender against suffering a loss in the event that you default on your mortgage payments. Private mortgage insurance in South Carolina is typically necessary if you put less than 20% down on a house or if you refinance and have equity that is less than 20% of the home’s value.
Most of the time, your South Carolina lender will increase your monthly mortgage payment to include the PMI fee. However, you have the choice to pay it upfront, monthly or a combination of the two. A 20% down payment will alleviate the expense, but you might not be eligible for a refund if you refinance or move.
How much is the average mortgage insurance cost in SC?
Typically, monthly costs are between 0.5 and 1% of the overall loan amount. Therefore, your payment on a $150,000 loan may be as much as $1,500 each year or $125 per month. Even though it may seem excessive, there are benefits to paying PMI, such as putting down less money when purchasing the house.
The amount of the loan and your credit score are two variables that will affect the price of PMI. According to mortgage insurance data from the Urban Institute, PMI typically costs between 0.58% and 1.86% of the loan amount and can be paid either monthly or all at once. According to Freddie Mac’s calculations, this will increase a monthly mortgage payment by $30 to $70 for every $100,000.
Is mortgage insurance expensive in South Carolina?
The answer to this question depends on the credit score and type of loan. However, if mortgage insurance allows the buyer to purchase a house quicker due to having a smaller down payment, it is a necessary and beneficial expense.
What are the types of mortgage insurance in SC?
You should be aware of the three different types of mortgage insurance. The categories are described briefly below.
1. Borrower Paid Mortgage Insurance
Your PMI will typically be a borrower-paid mortgage insurance policy (BPMI). This kind of PMI is typically what is meant when lenders discuss it. Your monthly mortgage payment will include the mortgage insurance in this scenario.
Let’s examine how it might impact your costs. Normally, PMI costs between 0.5% and 1% of your loan balance annually. This equates to around $83 to $166 in monthly mortgage insurance or $1,000 to $2,000 annually.
Once you have paid more than 20% of the home’s worth, you may apply to cancel the insurance with a conventional loan. However, once 22% of the mortgage has been paid (your mortgage is at 78% loan to value), the PMI will be canceled automatically by the lender.
2. Lender Paid Mortgage Insurance
Mortgage insurance that is paid for by your lender is referred to as “lender-paid mortgage insurance” (LPMI), and as a result, your mortgage rate is higher. For LPMI, the interest rate increase is typically.25–.5% higher. Since LPMI does not demand a 20% down payment, you will save on monthly payments and have a smaller down payment.
The interest rate to cover the mortgage insurance will increase with lower credit scores. If your credit score is low, LPMI will cost you extra. Additionally, because LPMI is incorporated into your payment schedule for the duration of the loan, you won’t be able to cancel it.
3. FHA Mortgage Insurance Premium
We’ve discussed the several types of mortgage insurance available for traditional loans, but what about house loans with government backing? The majority of FHA home loans, which are federally-backed loans for first-time homebuyers, also demand the payment of mortgage insurance in the form of a mortgage insurance premium (MIP).
Unless you put a down payment of 10% or more, you typically pay mortgage insurance for the entire length of your loan. With a 10% or more down payment, the MIP will be removed after 11 years. There are several ways you’ll need to pay. The upfront mortgage insurance payment for FHA loans (UFMIP), which is typically 1.75% of your base loan amount, comes first.
You’ll also pay a monthly charge of .85% for mortgage insurance unless a down payment of 5% or more is utilized, in which case the mortgage insurance is .80%.
South Carolina Private Mortgage Insurance
Private mortgage insurance (PMI) aids in shielding lenders from financial harm caused by a borrower’s default and subsequent property foreclosure. If the down payment is less than 20% of the home’s total value, lenders typically need PMI when you buy a house. If you don’t pay your mortgage, the insurer will provide your lender 20 to 30 percent of the outstanding total, depending on the type of insurance you have. That usually covers the expenses the lender must pay to foreclose, seize, and sell your home.
In most situations, if you are unable to contribute the needed 20% down payment, PMI can help you buy a property you otherwise could not afford due to the larger down payment requirement. You could be able to buy a bigger, more expensive home with PMI than you could without the insurance.
With PMI, a home buyer can qualify for a mortgage with a down payment as low as 3%.
Contact Cain Mortgage Team Today to help you get started in the right direction.