Private Mortgage Insurance Pricier for Single Borrowers

Private mortgage insurance is required on conventional mortgages when there is less than 20% equity on a property, when the loan-to-value is greater than 80%. Private mortgage insurance (pmi) that is paid monthly automatically drops off the mortgage payment once the mortgage balance reaches 78% of the original loan amount. Private mortgage insurance premiums are intended to be risked based. The more equity or down payment on a home and the higher your credit scores are, the lower the premiums tend to be.

In June, many private mortgage insurance companies changed their rates for their mortgage insurance premiums. One of the most notable changes, in my opinion, is that private mortgage insurance companies are charging a higher premium if there is only one borrower on the loan. This adjustment is in addition to any other risk factors, such as loan-to-value and credit score. Since when is being single a risk factor?

This chart from a private mortgage insurance company shows the factors that are added (or in this case deducted) from a base rate to determine what the private mortgage insurance premium will be. So a single borrower with credit scores of 700 or higher, will pay a factor of 0.13% more than a transaction with more than one borrower. To determine what the difference is (or a private mortgage insurance rate), take the loan amount and multiply it by the factor (0.13%) . For the monthly premium, divide that figure by 12.

It’s surprising to me that private mortgage companies would single out those who are financing a home without a co-borrower. I assume that pmi companies are thinking that the more borrowers, the less risk of foreclosure. However this seems to feel like discrimination to me. It will be interesting to see how long this rate stands.

UPDATE December 2018: Great news! Since this post was published, we’re seeing some private mortgage insurance companies no longer punishing borrowers who happen to be single. Also, I should note that the pmi rates shown above are subject to (and will) change.

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