Private Mortgage Insurance

Even if you can’t afford to put 20% down, you may still be able to fulfill your dream of owning a home. Private Mortgage Insurance (PMI) makes homeownership a possibility for people who don’t have as much to contribute for a down payment. PMI is an insurance policy that helps protect the lender in case of default on mortgage payments.

While you are required to get PMI if your down payment is less than 20% of the appraised value or sale price of your home, you do have options when it comes to the terms of your policy. Redstone offers two types of PMI and there are advantages to each, depending on your situation. If you’d like help deciding which one best matches your needs, contact a member of our Mortgage Team and we’ll walk you through the pros and cons.

Borrower-Paid Mortgage Insurance (BPMI)

How it works:

Premium is added to your monthly
payment
May cause you to have higher monthly payments
May be tax deductible*
May be canceled when the loan-to-value reaches 80% of the original value**

Best if you:

Will stay in your home over 10 years
Have a long-term mortgage
Need to borrow less than 85% of your home's value
Want to make higher monthly payments so you can cancel BPMI later
Think your home's value will increase

Lender-Paid Mortgage Insurance (LPMI)

How it works:

Cost of insurance is included in your interest rate/APR, creating a higher rate
Could lower your monthly payments
You may receive a larger tax deduction*
Cannot be canceled by you, the borrower**

Best if you:

Will move or refinance within 10 years
Have a short-term mortgage
Need to borrow more than 85% of your home's value
Want a lower monthly payment
Want a possible larger tax deduction*

Mortgages are only available for properties located in Alabama and Tennessee.

Loans subject to credit approval. Must be RFCU® member to obtain mortgage. Must be eligible for membership and open a share savings account. A minimum balance of $5.00 is required to open and be maintained in share savings account at all times. Fees and other restrictions may apply. Contact Credit Union for details. Various types of mortgage loan programs and terms are available. RFCU is an Equal Opportunity Lender. Rates, terms and conditions are subject to change without notice. Must create separate user name and password to gain access to mortgage application process

*Consult your tax advisor regarding the deductibility of mortgage interest and private mortgage insurance premiums.

**LPMI typically terminates only when the loan is refinanced, paid off, or otherwise terminated. For BPMI, when the loan-to-value ratio reaches 78% of the original value, BPMI will be automatically terminated.

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