Insurance
What is PMI? Guide to how private mortgage insurance works
Published
5 months agoon
By
scholarpus
When you buy a home, you’ll pay for homeowners’ insurance to protect the property. However, you might also pay for another kind of insurance coverage — one that doesn’t protect you, but instead protects the lender that helped you buy your home. Private mortgage insurance, commonly shortened to PMI, is a common cost for homeowners who made a down payment smaller than 20 percent of the home’s purchase price.
What is PMI?
Private mortgage insurance (PMI) is a type of insurance that conventional mortgage lenders require when homebuyers put down less than 20 percent of the home’s purchase price.
PMI is designed to protect the lender in the event that the homeowner defaults on the loan. While it doesn’t protect the homeowner from foreclosure, it does allow prospective homebuyers to become homeowners even if they can’t afford a 20 percent down payment. If your lender determines you’ll need to pay PMI, it will coordinate with a private insurance provider, and the terms of the insurance plan will be provided to you before you close on your mortgage.
If you’re paying for PMI, that cost won’t stay with you forever. Once you’ve reached 20 percent equity — either through paying down your loan balance over time or through rising home values — you can contact your loan servicer about removing PMI from your mortgage. Servicers must terminate PMI on the date that your loan balance is scheduled to reach 78 percent of the home’s original value.
How much does PMI cost?
The average range for PMI premium rates is 0.58 percent to 1.86 percent of the original amount of your loan, according to the Urban Institute. Freddie Mac estimates most borrowers will pay $30 to $70 per month in PMI premiums for every $100,000 borrowed. How much you will pay for PMI depends on two key factors:
- Your loan-to-value (LTV) ratio – How much you put down will impact how much you’ll pay for PMI. For example, if you put down 5 percent, your LTV ratio would be 95 percent. If you put down 15 percent, your LTV ratio would be 85 percent. When you can only make a small down payment, the lender is assuming a bigger risk, and your PMI payments will be higher to account for that risk.
- Your credit score – Your credit history and corresponding credit score play a major role in the cost of PMI. For example, consider the Urban Institute’s example of someone buying a $250,000 property with a 3.5 percent down payment. With an excellent FICO score of 760 or greater, the monthly mortgage payment including the insurance is $1,164. For a buyer with a credit score between 620 and 640, those monthly payments are $1,495 – a reflection of a significantly higher PMI charge.
Here’s a look at how PMI might play out based on how much you put down, according to the Freddie Mac mortgage insurance calculator and the Bankrate mortgage calculator. These examples assume a $329,000 purchase price and a 3.25 percent interest rate, and do not account for homeowners insurance and property taxes.
| Down payment | 5% down | 15% down | 20% down |
|---|---|---|---|
| Monthly PMI payment | $300 | $78 | $0 |
| Monthly mortgage payment (principal, interest and PMI) | $1,660 | $1,295 | $1,145 |
Different types of PMI
There are a few options for private mortgage insurance:
Borrower-paid mortgage insurance
With borrower-paid mortgage insurance, the premiums are part of your monthly bill. This will also include the principal balance, interest charges and other costs such as property taxes. The funds are then disbursed each month to the insurer.
You’ll see an indication each month of a “special payment,” which is simply an explanation that the money was paid out.
With borrower-paid mortgage insurance, you may be able to get the payments removed after meeting specific requirements, such as reaching 20 percent equity, 78 percent loan-to-value, or finishing half of your payment term.
Lender-paid mortgage insurance
Lender-paid mortgage insurance might sound appealing, but make no mistake: You’ll still pay for the coverage. Instead of seeing that premium as a line item, you’ll likely pay a higher interest rate on the mortgage and/or shell out additional origination fees for the loan.
Another drawback is that you can’t get lender-paid PMI canceled in the same way that you can with borrower-paid insurance. Your main path to getting out of lender-paid PMI is to refinance.
Single-premium mortgage insurance
Instead of dividing up payments into regular installments each month, single-premium PMI bundles the entire cost of the insurance into one payment.
Depending on the terms of the loan, you can either pay this in full at closing or roll the amount into the loan for a higher balance.
If you pay it upfront, you’ll get the benefit of lower monthly payments. However, if you sell your home shortly after buying it, you might wind up worse off than if you’d just paid PMI monthly.
Also consider the fact that if you’re struggling to make a 20 percent down payment, you may not have the cash to afford a large, upfront insurance payment.
Split-premium mortgage insurance
In a split-premium PMI arrangement, you’ll pay a larger upfront fee that covers part of the costs to then shrink your monthly payment obligations.
This combines the pros and cons of single-premium and borrower-paid PMI. You need some cash, but not as much, to pay the upfront premium. You then benefit from lower monthly costs.
Split-premium mortgage insurance can also be helpful if you have a higher debt-to-income ratio. It lets you lower your potential mortgage payment to avoid pushing your DTI too high to qualify.
FHA mortgage insurance
This type of mortgage insurance comes with an FHA loan. It involves an upfront payment and then annual mortgage insurance premiums (MIP), which can’t be canceled in most circumstances.
To get out of FHA mortgage insurance without refinancing, you’ll have to wait 11 years. And even in that case, the insurance will only be canceled if your initial down payment was 10 percent or more.
How do I make PMI payments?
There are three primary schedules for making PMI payments. The options available to you will vary depending on your lender.
- Monthly: The most common method is paying PMI premiums monthly with your mortgage payment. This boosts the size of your monthly bill, but allows you to spread out the premiums over the course of the year.
- Upfront: Another option is an upfront PMI payment, meaning you pay the full premium amount for the year all at once. Your monthly mortgage payment will be lower, but you need to be ready for that larger annual expense. Additionally, if you move sometime in the year, you might not be able to get part of your PMI refunded.
- Hybrid: The third option is a hybrid one: paying some upfront and some each month. This can be useful if you have extra cash early in the year and want to limit your monthly housing costs.
Ask your lender if you have a choice for your payment plan, and decide which option is best for you.
Do all lenders require PMI?
As a rule, most lenders require PMI for conventional mortgages with a down payment less than 20 percent. However, there are exceptions to the rule, so you should research your options if you want to avoid PMI.
For example, there are low down-payment, PMI-free conventional loans, such as PMI Advantage from Quicken Loans. The lender will waive PMI for borrowers with less than 20 percent down, but also bump up your interest rate, so you need to do the math to determine if this kind of loan makes sense for you.
Some government-backed programs don’t charge mortgage insurance. For example, if you’re eligible, VA loans don’t require it. This can be helpful for homebuyers who don’t have enough saved up to make a large down payment.
FHA loans require their own mortgage insurance, though the rates can be lower than PMI. However, you won’t have an option to cancel the insurance even after you reach the right equity threshold. In the long term, this can be a more expensive option. Your credit score won’t affect the insurance rate for FHA loans, though it could be higher if you put down less than 5 percent.
Is there any advantage to paying PMI?
Paying PMI comes with one major benefit: the ability to buy a home without waiting to save up for a 20 percent down payment. Single-family home prices are historically high, sitting at an average of $410,600 in July 2022, according to the National Association of Realtors. A 20 percent down payment at that price would be more than $82,000, which can seem like an impossible figure for many first-time homebuyers.
Instead of waiting while saving, paying PMI allows you to stop renting sooner. Homeownership is generally an effective long-term wealth-building tool, so owning your own property as soon as possible allows you to start building equity sooner, and your net worth will expand as home prices rise. If home prices in your area rise at a percentage that’s higher than what you’re paying for PMI, then your monthly premiums are helping you get a positive return on your investment on your home purchase.
Is PMI tax-deductible?
The government reinstated the ability to deduct private mortgage insurance premiums from your taxes in 2020. That benefit is available again in 2022; however, the benefit begins to phase out after your adjusted gross income reaches $109,000. You should determine if itemizing your deductions and including your PMI is greater than taking the standard deduction.
How to stop paying PMI
You can remove private mortgage insurance in the following ways:
- Build equity in your home over time. Your mortgage servicer is legally required to stop charging PMI premiums once your balance hits 78 percent of the original loan. (Note, this does not apply to FHA loans. You can only cancel FHA MIP if you put down at least 10 percent on your home and when you reach the 11-year mark in your repayment schedule.)
- Contact your servicer when you have 20 percent equity. You can press fast-forward on that automatic PMI cancellation when your balance reaches 80 percent of the original loan. At this point, you can request to cancel PMI.
- Get your home appraised. Reaching that magic 20 percent equity marker doesn’t just involve paying down your principal over time. If your home’s value has appreciated since you purchased it, you can contact your lender to request a professional appraisal. According to HomeAdvisor, an appraisal will cost around $350 — a small price that can quickly be recouped after a few months of cheaper payments.
- Refinance your mortgage. Refinancing your mortgage is another option that will include an appraisal. This process costs quite a bit more, but it can make sense if your original mortgage had a high interest rate. Use Bankrate’s refinance calculator to estimate if refinancing is the right move for you.
How to avoid paying PMI?
To avoid PMI for most loans, you’ll need at least 20 percent of the home’s purchase price set aside for a down payment. For example, if you’re buying a home for $250,000, you need to be able to put down $50,000.
Another strategy is a piggyback mortgage. With a piggyback loan, you’d actually get two separate mortgages, one for 80 percent of the home’s value and one for 10 percent. You’d make a 10 percent down payment from your savings, and use the smaller of the two loans to complete the 20 percent down payment.
The upside of this strategy is avoiding PMI, but a piggyback mortgage means having two loans and two monthly payments to make, so consider this option carefully. Some piggyback loans also have shorter terms than the primary mortgage, so your monthly payments will be higher.
You can also find a lender that offers lender-paid PMI. In this scenario, the lender will make the PMI payments. However, the loans usually have higher interest rates.
Another option is to look for loans with no PMI requirements. Some loan programs, such as VA loans, have no PMI payments. Individual lenders may also offer mortgage programs that let you avoid PMI, such as programs for low-income buyers, or people in specific professions such as teaching or medicine.
Bottom line
Private mortgage insurance (PMI) adds to your monthly mortgage expenses, but it can help you get your foot in the homeownership door. When you’re buying a home, check to see if PMI will help you reach your real estate goals faster. Don’t agree to a mortgage without comparing offers from at least three different lenders, though — that way you can try to get the best rate and terms for your specific financial situation.
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Health insurance is insurance coverage that typically pays for medical bills, doctors visits, some prescription drugs and sometimes dental expenses incurred by the insured. If you are planning to study in Canada, you should think about getting international student health insurance coverage for yourself. It is essential that you have a health insurance plan for the duration of your program.
While Canada is well known throughout the world for its free healthcare system, it does not have health insurance coverage for all international students attending school in Canada.
International students who plan to study in Canada should get acquainted with the kind of health care that is obtainable in his proposed province of study since health care plan in the country varies from province to province. While few provinces cover international students under provincial health insurance plans, the majority of other provinces require that students get registered for private health insurance plans.
However, some institutions still demand that students registers with schools’ health insurance plan, others make it optional and students may even decide to decline to register as long as they have a health insurance plan.
Normally, the insurance plan will offer flexibility and freedom, covering all medical needs, emergency health needs, surgery, and other expensive in-patients treatment. Medical evacuation, rehabilitation treatment, and hospital accommodation are also covered in many health insurance packages.
Why Do I Need Health Insurance as International Student?
It’s of great necessity that international students get a health insurance plan. You will agree that studying abroad can be fun and rewarding especially when you are out of the confines of your home, away from your parent; you become your own boss, meet with new friends, learn new languages and culture, explore your new environment and do whatever fascinates your interest.
But traveling and even living in a foreign country also poses unprecedented challenges- from a simple change of weather to an unexpected stomach upset due to a change of diet or even to a more grave danger like having a fatal accident or unexpected injury can get you to the hospital. You need health insurance coverage to take care of all these medical emergencies.If you are a landed permanent immigrant in Canada, consider checking out our article on Newcomers Insurance plan instead.
Benefits of International Student Health Insurance
There are several benefits for securing international student health insurance. Securing good health care coverage saves you from paying those high hospital bills for a long time. Also, the amount you pay is nothing compared to what you would have to pay if you did not have health insurance coverage.
For example, according to Canadian Magnetic Imagining, an MRI scan alone could cost you anywhere around $900 CAD and $2,400 CAD. If you have good health coverage, you will be paying far lesser. International student health insurance often covers pre-existing injuries, sports, injuries, mental health, maternity expenses, hospitalization, and prescriptions.
Students get to enjoy lower premiums compared to older folks since they are generally young and healthy. You get to enjoy more affordable plans. Plus the payment of these premiums can be broken down and paid throughout the duration of your stay.
How Much Is Student Health Insurance in Canada?
Most provinces have free health insurance coverage for International students studying in Canada. Students or visitors who are not covered by free healthcare plans must have health insurance as been made compulsory by Canadian post-secondary schools. Health insurance in Canada for international students varies from province to province or location to location, and it also depends upon the insurance firm.
In line with Canada Insurance Plan, the average yearly premium for accessing health insurance ranges from $600 CAD to $900 CAD. Some of the insurance service providers/companies that foreign students and visitors could approach for health insurance are:
- Manulife Financial;
- TuGo;
- Sun Life;
- Ingle International;
- Cowan Insurance Group;
- Greenshield.
- Allianz Global;
The insurance packages from these companies include some common benefits (however, the limit of each benefit varies from plan to plan) such as:
- Physician charges;
- Private nurse;
- Trauma counseling;
- Medical appliances;
- Treatment of dental accident;
- Prescription drugs;
- Paramedical services;
- Diagnostic services;
- Psychiatric treatment.
- Hospital expenses and accommodation;
How to Apply for Student Health Insurance in Canada?
The rules and regulations for health insurance in Canada vary from one province to province. Some Canadian provinces provide health insurance coverage to foreign students as well.
If you have obtained admission to a university or college domiciled in any of these provinces, you need to apply for health insurance by checking the said province’s website, filling and completing an application form, and purchasing the premium amount.
On the other hand, if a province does not provide health insurance coverage for students, you may have to take an overseas health insurance plan from a private firm, before leaving for Canada.
In this case, you will need to reach out to an insurance firm, choose the plan or package that suits your requirements, fill a detailed application form, go through a medical test, and pay the premium amount.
Top 5 Schools that offer student health insurance in Canada
If you are interested in studying in Canada, there are some post-secondary schools that offer a variety of healthcare plans. Below are some schools in Canada that offer special health coverages to their students.
#1. McGill International Student Health Insurance
Mcgill university located in Montreal, Quebec, Canada, is a public university that is well known for its outstanding contribution in the area of scientific research.
McGill is one of the schools on the list of DLIs with an approved COVID-19 readiness plan. The university requires all foreign students and their accompanying dependents to avail themselves in the compulsory McGill International Health Insurance (IHI) coverage which is organized and administered by International Student Services.
In Mcgill, All foreign Students are automatically charged the annual IHI fee ($1128) upon registration at the university in the fall and winter semester.
#2. UBC student health insurance
The University of British strongly recommends that all international students have basic and extended health insurance for the duration of their programs. The BC Medical Services Plan (MSP) is the provincial government program that provides basic health care.
Everyone living in British Columbia province for more than six months is required to enroll in this program, except students with existing health coverage from another province or territory in Canada.
If you come to the province without coverage under MSP or another provincial health plan and will be there for six months or longer, you should enroll for MSP immediately upon your arrival. As there is a three-month processing period before MSP coverage will start, you must make sure you have basic health insurance for those first three months in British Columbia province.
#3. Saskatchewan university student health insurance
The University of Saskatchewan Students’ Union partnered with the health and dental insurance provider Studentcare to offer undergraduate and graduate international students health and dental insurance coverage. Some undergraduate students are automatically enrolled in the plan, while others need to apply.
If you are automatically covered, the cost of the plan is part of your tuition fees. See if you are automatically covered by checking your tuition statements or by visiting www.studentcare.ca.
#4. BCIT Student health insurance
Basic medical insurance coverage is compulsory for all international students throughout the duration of their program at BCIT. Students are required to purchase private medical coverage provided by Guard.me. The school does not accept insurance from companies outside of Canada.
#5. Seneca college international student health insurance
As an international student enrolled in a full-time program at Seneca college, you have mandatory health insurance included in your tuition fees. You will be automatically included in the health insurance plan depending on your program start date.
You are expected to pay any outstanding balance at the beginning of your semester. Your health insurance includes services such as hospital and doctor services in Ontario, eye examinations, diagnostic laboratory and x-ray services, emergency services, and dental care in the hospital. The coverage also provides for doctor’s services and hospital ward accommodation.
The coverage includes prescribed drugs, paramedical services such as psychologists, physiotherapists, and more. Limited emergency out-of-country coverage and out-of-province are also included in this plan.
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Insurance
6 Best cheap car insurance in Ontario for 2022
Published
5 months agoon
January 16, 2023By
scholarpus
Car insurance is legally required in Ontario, which is more than enough of a reason for drivers to invest in coverage. However, this is far from the only reason drivers should purchase a policy. Finding the best car insurance in Ontario can save you money on premiums and claims. The average cost of car insurance in Ontario is $763 per year for minimum coverage and $2,098 for full car insurance.Advertising Disclosure
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Ontario is part of San Bernardino County, one of the fastest-growing areas of the Southern California basin. Since 2011, vehicle registrations in the country have grown 16%, outpacing California’s average increase of 11%. Unfortunately, the number of traffic collision victims have also increased. Since 2019, vehicle-related fatalities are up 32%. Bike-related injuries and fatalities are up 46%, all potentially due to distracted driving.
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Finding the cheapest car insurance in Ontario may help you afford enough coverage to protect you against all the potential dangers on the road.
Best car insurance companies in Ontario
The following four carriers are a combination of cheapest car insurance in Ontario and good customer ratings. We used Bankrate’s quote data collected from over 20 Ontario-area insurance providers to find the cheapest carriers. To narrow the list down further, we chose insurance companies with good customer reviews. J.D. Power’s customer satisfaction study was instrumental because it is based on reviews from policyholders regarding the insurer’s claims process, communication and available coverages.
| Insurance company | J.D. Power customer satisfaction score (California) | Average annual premium for minimum coverage | Average annual premium for full coverage |
|---|---|---|---|
| AAA | 830 / 1,000 | $576 | $1,875 |
| Grange | Not rated | $584 | $2,151 |
| Geico | 828 / 1,000 | $627 | $1,797 |
| Wawanesa | 853 / 1,000 | $668 | $1,591 |
AAA
AAA is well-known for providing roadside service and towing to 61 million members nationwide. You get more than just towing for the membership fee — AAA car insurance is also available. The carrier’s policies deliver the cheapest car insurance Ontario rates. Customer service is not sacrificed for lower rates. When it comes to customer satisfaction, AAA earned third place in J.D. Power’s auto insurance study.
Grange
Grange Insurance does not rank in J.D. Power’s California study due to its smaller market share. When referencing the National Association of Insurance Commissioner’s insurance complaint index, there were only eight complaints over one year. It is slightly above average, but Grange’s second-lowest minimum car insurance rates in Anaheim tend to offset the complaints. Focusing on what Grange does well, you will find minimum liability and full car insurance as well as gap coverage and insurance for high-end sound equipment and custom accessories.
Geico
Geico’s full coverage rates are among the lowest on average. Full coverage is typically more expensive because it adds insurance for your vehicle as well, such as comprehensive and collision insurance. If you drive an older vehicle or one with a low value, you may be fine with low-cost minimum car insurance. But if you have a higher-model vehicle or have assets you would like to financially protect, full coverage car insurance from Geico may be your best bet.
Wawanesa
Wawanesa Insurance is #1 in customer satisfaction in the J.D. Power study for California. The carrier is Canada-based and does not have any offices in California, but the website is robust enough to handle most of your car insurance needs online. Some of the optional coverages available include replacement parts using the vehicle manufacturer’s originals and rental expense insurance that can increase your vehicle rental allowance if you would like to rent a larger or more expensive vehicle while your car is in the shop for a covered cause. Ontario drivers should find the coverage they are in search of with Wawanesa.
Cheapest car insurance in Ontario
To get a better idea of how much car insurance costs in Ontario, take not of the following figures:
- The average annual cost of car insurance in California is $733 for minimum car insurance and $2,065 for full coverage.
- The national average is $1,674 per year.
Keep the following rates in mind for the cheapest, largest carriers in Ontario based on market share. When shopping around for car insurance, they can provide you with an idea of whether you are paying more for coverage than average. Unless you have a history of accidents and tickets or you are a teen driver, your rates should be relatively close to Bankrate’s findings.
| Insurance company | Average annual premium for minimum coverage | Average annual premium for full coverage |
|---|---|---|
| AAA | $576 | $1,875 |
| Geico | $627 | $1,797 |
| Mercury | $635 | $1,634 |
| Travelers | $693 | $1,882 |
| Progressive | $696 | $1,888 |
AAA has a couple of nearby chapter offices in Upland and Chino if you would like to visit a local agent. Geico and Mercury typically provide the lowest insurance rates. Travelers and Progressive both have a variety of optional coverages such as rideshare insurance, gap coverage and new car replacement.
Ontario insurance requirements
The State of California requires all vehicle owners, including those residing in Ontario, to have a minimum amount of liability coverage. However, the following requirements should be a starting point. If you total a newer vehicle, $5,000 in property damage coverage does not cover the value of the vehicle, leaving you liable for any damages of $5,000. In addition, your lender or leasing company may require you to carry full car insurance, which could include comprehensive, collision and uninsured/underinsured motorist insurance. California’s insurance requirements are:
- $15,000 in death and/or bodily injury per person
- $30,000 in death and/or bodily injury per accident
- $5,000 for property damage per accident
Car insurance discounts in Ontario
Even if you found a car insurance company in Ontario offering lower rates than you currently pay, you might save further by checking for carrier-specific car insurance discounts. The following could reduce your car insurance bill:
- Autopay: Automatic payments directly from your account simplifies your life and may earn you a small discount.
- Bundling: Buying home, renters and/or car insurance from the same company could lower your premiums on all.
- Young driver: Teens and young adults typically pay the highest rates. Young driver discounts could help parents or independent young adults save money.
- Switching: If you find lower rates with a different insurance company and decide to change carriers, you may also receive an additional discount for switching.
Bundling and young driver discounts are two of the most effective discounts when you want to significantly reduce your rates.
Frequently asked questions
What is the best car insurance company?
The best car insurance companies in Ontario are different for everyone. Consider the factors that are most important to you and get several quotes to find the best option for you.
How much does car insurance in Ontario cost?
The average cost of car insurance in Ontario is $763 annually for minimum car insurance and $2,098 for full coverage. Rates are slightly higher than Bankrate’s findings of California premiums, averaging $733 for minimum car insurance and $2,065 for full coverage.
How much car insurance do I need in Ontario?
All vehicle owners in Ontario must have liability coverage of at least $15,000 in death and/or bodily injury per person, $30,000 in death and/or bodily injury per accident and $5,000 for property damage per accident.
Methodology
Bankrate utilizes Quadrant Information Services to analyze 2021 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:
- $100,000 bodily injury liability per person
- $300,000 bodily injury liability per accident
- $50,000 property damage liability per accident
- $100,000 uninsured motorist bodily injury per person
- $300,000 uninsured motorist bodily injury per accident
- $500 collision deductible
- $500 comprehensive deductible
To determine minimum coverage limits, Bankrate used minimum coverages that meet each state’s requirements. Our sample drivers own a 2019 Toyota Camry, commute five days a week and drive 12,000 miles annually.
These are sample rates and should be used for comparative purposes only. Your quotes may be different.