What is mortgage insurance?
Mortgage insurance is a fee you pay to your lender to cover risks associated with funding your loan.
Different loan types have different kinds of mortgage insurance, which may require either upfront or ongoing, monthly premiums, or both.
Some loans don't require mortgage insurance. For example, you can avoid mortgage insurance with a conventional loan by making a down payment of 20 percent or more.
Mortgage insurance is an insurance policy that protects the mortgage lender in case you are unable to pay back your mortgage. It's typically required when borrowers make lower down payments. When someone has less invested in the home upfront, the lender takes on more risk in issuing the mortgage. Mortgage insurance helps cover that risk.
Although it covers the lender, and the lender chooses the insurer and the policy, the borrower pays for mortgage insurance.
The type of mortgage insurance you'll need depends on the type of loan you have. Options include:
Private mortgage insurance (PMI): If you put less than 20 percent down on a conventional loan, you'll pay PMI as part of your monthly mortgage payment.
FHA mortgage insurance premium (MIP): All FHA loans require MIP, which involves a monthly payment as well as an upfront payment that can be rolled into your loan amount.
VA funding fee: VA loans don't technically require mortgage insurance, but you will need to pay a funding fee at closing — or roll it into your loan balance.
USDA guarantee fee: Similar to the VA funding fee, you'll need to pay a guarantee fee to get a USDA loan. There's both an upfront fee and an ongoing fee.
Mortgage title insurance: Title insurance protects various parties against liability if there's an ownership dispute or title defect during a home purchase. Lender's title insurance protects the lender, and owner's title insurance protects the owner.
Different types of mortgage insurance have different requirements and durations.
For example, with a conventional mortgage, you'll pay mortgage insurance as part of your mortgage payment. You can request to cancel PMI once you have 20 percent equity in your home. It will be automatically canceled once you have 22 percent equity.
With an FHA loan, everyone pays mortgage insurance, no matter the size of the down payment. You'll pay both upfront MIP and annual MIP. If you make a down payment of less than 10 percent, you can't cancel MIP – you'll pay it for the life of the loan. If you put down 10 percent or more, you'll pay annual MIP for 11 years, or until you refinance or sell.
Even with mortgage insurance, you could lose your home to foreclosure if you fall behind on your payments.
If it's possible for you to make a 20 percent down payment on a conventional loan, you'll likely receive a lower mortgage rate, in addition to not having to pay for mortgage insurance.
The cost of mortgage insurance depends on factors such as:
The type of mortgage
The loan size
The loan term
Your initial down payment
Your credit score
Let's break it down by loan type, using a $400,000 mortgage as an example:
Loan type
Mortgage insurance rate
Cost for a $400,000 loan
Conventional loan
Average cost ranges from 0.46 percent to 1.5 percent of the loan amount annually, according to the Urban Institute
$153 to $500 a month
FHA loan
Requires an upfront MIP (1.75 percent of loan amount) and annual MIP (between 0.15 percent and 0.75 percent)
Upfront: $7,000Annually: $600 to $3,000
USDA loan
Includes an upfront guarantee fee of up to 3.5 percent of your loan amount, as well as an annual fee of up to 0.5 percent of your loan amount
Upfront: Maximum of $14,000 Annually: Maximum of $2,000
VA loan
An upfront fee of 1.25 percent to 3.3 percent of the loan amount
$5,000 to $13,200
How is mortgage insurance calculated?
Mortgage insurance is calculated based on several variables, including loan amount and loan-to-value (LTV) ratio, or down payment amount. The higher your down payment, the lower your mortgage insurance premium will be.
It's pretty clear how this coverage benefits the lender, but how does mortgage insurance work for the borrower? Here are the main pros and cons.
Don't need to put 20 percent down to get a mortgage
Start building equity more quickly
More money to spend on other things, such as furniture or initial repairs, instead of putting it toward a larger down payment
Extra expense to pay
Can be hard or impossible to cancel, depending on the loan type
Protects the lender, not you
As the cost of homes continues to rise, it's becoming harder and harder to afford a mortgage payment — let alone to put 20 percent down on a home. If paying mortgage insurance helps you get into a home more quickly — or if saving 20 percent is nearly impossible on your budget — it's likely worthwhile, even if it costs a little more.
However, if you really don't want to pay for mortgage insurance, and you can't afford to put 20 percent down, you may explore a couple of options:
Down payment assistance programs can offer help with upfront homeownership costs in the form of grants or low-cost loans. Some offer mortgages that don't require mortgage insurance.
A piggyback loan involves getting two mortgages to pay for your home: one for 80 percent of the home price, and one for 10 percent. The second, smaller mortgage covers part of the down payment. Finally, you'll make a down payment of 10 percent, bringing you to a 20 percent down payment. Before choosing a piggyback loan, do the math versus the cost of PMI to ensure you'll save money.
Is mortgage insurance tax-deductible?
No. The itemized deduction for this cost has expired. Unless legislation renews it, you won't be able to claim a tax perk for mortgage insurance premiums.
What is the difference between mortgage insurance and homeowners insurance?
Mortgage insurance protects the lender if you stop paying your mortgage. Homeowners insurance protects you if you experience a covered loss, for example, if your house burns down in a fire or your home is damaged or destroyed by a tornado.
What happens if I stop paying mortgage insurance?
You can't simply stop paying for the insurance policy, even if you've reached the required level of equity. You must first contact your lender to get the mortgage insurance policy canceled. However, by law, lenders must cancel PMI on conventional loans when you've reached a 78 percent LTV ratio.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
35 minutes ago
- Yahoo
Trump and TSMC pitched $1 trillion AI complex — SoftBank founder Masayoshi Son wants to turn Arizona into the next Shenzhen
When you buy through links on our articles, Future and its syndication partners may earn a commission. Masayoshi Son, founder of SoftBank Group, is working on plans to develop a giant AI and manufacturing industrial hub in Arizona, potentially costing up to $1 trillion if it reaches full scale, reports Bloomberg. The concept of what is internally called Project Crystal Land involves creating a complex for building artificial intelligence systems and robotics. Son has talked to TSMC, Samsung, and the Trump administration about the project. Masayoshi Son's Project Crystal Land aims to replicate the scale and integration of China's Shenzhen by establishing a high-tech hub focused on manufacturing AI-powered industrial robots and advancing artificial intelligence technologies. The site would host factories operated by SoftBank-backed startups specializing in automation and robotics, Vision Fund portfolio companies (such as Agile Robots SE), and potentially involve major tech partners like TSMC and Samsung. If fully realized, the project could cost up to $1 trillion and is intended to position the U.S. as a leading center for AI and high-tech manufacturing. SoftBank is looking to include TSMC in the initiative, given its role in fabricating Nvidia's AI processors. However, a Bloomberg source familiar with TSMC's internal thinking indicated that the company's current plan to invest $165 billion in total in its U.S. projects has no relation to SoftBank's projects. Samsung Electronics has also been approached about participating, the report says. Talks have been held with government officials to explore tax incentives for companies investing in the manufacturing hub. This includes communication with Commerce Secretary Howard Lutnick, according to Bloomberg. SoftBank is reportedly seeking support at both the federal and state levels, which could be crucial to the success of the project. The development is still in the early stages, and feasibility will depend on private sector interest and political support, sources familiar with SoftBank's plans told Bloomberg. To finance its Project Crystal Land, SoftBank is considering project-based financing structures typically used in large infrastructure developments like pipelines. This approach would enable fundraising on a per-project basis and reduce the amount of upfront capital required from SoftBank itself. A similar model is being explored for the Stargate AI data center initiative, which SoftBank is jointly pursuing with OpenAI, Oracle, and Abu Dhabi's MGX. Melissa Otto of Visible Alpha suggested in a Bloomberg interview that rather than spending heavily, Son might more efficiently support his AI project by fostering partnerships between manufacturers, AI engineers, and specialists in fields like medicine and robotics, and by backing smaller startups. However, she notes that investing in data centers could also reduce AI development costs and drive wider adoption, which would be good for the long term for AI in general and Crystal Land specifically. Nonetheless, it is still too early to judge the outcome. The rumor about the Crystal Land project has emerged as SoftBank is expanding its investments in AI on an already large scale. The company is preparing a $30 billion investment in OpenAI and a $6.5 billion acquisition of Ampere Computing, a cloud-native CPU company. While these initiatives are actively developing, the pace of fundraising for the Stargate infrastructure has been slower than initially expected. SoftBank's liquidity at the end of March stood at approximately ¥3.4 trillion ($23 billion). To increase available funds, the company recently sold about a quarter of its T-Mobile U.S. stake, raising $4.8 billion. It also holds ¥25.7 trillion ($176.46 billion) in net assets, the largest portion of which is in chip designer Arm Holdings. Such vast resources provide SoftBank with room to secure additional financing if necessary, Bloomberg notes Follow Tom's Hardware on Google News to get our up-to-date news, analysis, and reviews in your feeds. Make sure to click the Follow button.
Yahoo
36 minutes ago
- Yahoo
Investors should consider this growth stock… it's SpaceX's competition
Rocket Lab (NASDAQ:RKLB) is a US-listed growth stock that gives investors rare access to the commercial space sector. As a vertically integrated launch and space systems provider, Rocket Lab is often compared to SpaceX in its ambition and capabilities. But there's one crucial difference: you can actually buy shares in Rocket Lab, while SpaceX remains private. Rocket Lab delivers launch services, builds small and medium-class rockets, and manufactures spacecraft components for a range of commercial, government, and defense customers. With rapid revenue growth, an impressive order book, and expansion into new markets, Rocket Lab offers public market investors a way to participate in the booming space economy. It targets many of the same opportunities as its more famous, privately held peer. Rocket Lab and SpaceX operate in the same commercial space sector but differ significantly in scale, maturity, and valuation. Rocket Lab's market cap is currently $12.85bn, with trailing 12 months (TTM) revenue of approximately $460m. Despite strong growth — revenue nearly doubled from $240m in 2023 — Rocket Lab remains a smaller, earlier-stage player focused on small to medium launch vehicles and spacecraft manufacturing. Its valuation multiples are extremely high, with a forward price-to-sales ratio of 22.3 times, reflecting investor optimism. SpaceX, by contrast, is a far more mature private company valued at about $350bn. It's projected to generate $15.5bn in revenue in 2025. This is driven by its dominant Falcon 9 launch services and rapidly growing Starlink satellite internet business. SpaceX's valuation implies roughly a 22.5 times multiple on forward revenue. This is broadly in line with Rocket Lab. Focusing on Rocket Lab, the company is projected to deliver rapid revenue growth over the next several years, with estimates rising from $573m in 2025 to $889 in 2026, $1.2bn in 2027, and $1.69bn in 2028. This represents annual growth rates consistently above 30%, and even a jump of nearly 77% in 2030. However, the number of analysts providing forecasts declines sharply after 2027, dropping from 11–14 analysts in the near term to just two or one by 2028 and 2030. The one analyst projecting as far as 2030 sees $4bn in revenue for the year. I had the chance to buy Rocket Lab shares at $15 just two months ago. I missed out as unfortunately my attention had been diverted elsewhere. However, I found another entry point. And personally, I see this as an investment to hold for a very long period. The space industry is still in its early innings, with enormous potential as satellite launches, lunar missions, and in-orbit services become increasingly mainstream. And like any investment, there are risks. Rocket Lab remains loss-making. It's expected to turn a profit in 2026, when it will trade at 620 times earnings. And while this moderates to 140 times in 2027, it's still expensive and introduces plenty of execution risk. However, I certainly believe UK investors should consider this one. It could be a real winner going forward. The post Investors should consider this growth stock… it's SpaceX's competition appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool James Fox has positions in Rocket Lab. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Sign in to access your portfolio
Forbes
an hour ago
- Forbes
New Jersey Anti-SLAPP Law Applies In Part In Federal Court In Paucek
The U.S. Circuit Courts of Appeals are split on the application of Anti-SLAPP laws in the federal ... More courts. Chip Paucek had been the CEO of a company (U2, Inc.) which had failed under some negative circumstances. Paucek is now the CEO of a new company (Pro-Athlete Community, Inc. a/k/a "PAC") which provides educational and other support to professional athletes who have ceased playing. Paucek came to the attention of Dahn Shaulis, who is a blogger covering the education industry through his publication Higher Education Inquirer ("HEI"). After following Paucek's failure with U2, Shaulis then began to investigate and cover Paucek's new venture, PAC. Long story short, Shaulis made some unflattering comments about Paucek on social media. Paucek had his attorney send Shaulis a cease-and-desist letter which also called for Shaulis to retract the offending comments. Shaulis agreed to do so, but only on terms that were unacceptable to Paucek. The day after receiving Paucek's cease-and-desist letter, Shaulis then posted on social media that he had received the letter but that he stood by the statements therein based on a variety of information. Paucek then sued Shaulis in the U.S. District Court for the District of New Jersey. Paucek alleged that Shaulis' social media posts were defamatory and that Shaulis had intentionally interfered with Paucek's prospective business relations. Shaulis responded by filing a motion to first determine if the New Jersey Uniform Public Expression Protection Act ("UPEPA") applied in federal court and which of several states' Anti-SLAPP laws should be applied to this controversy. The idea here was that the court would decide these threshold issues before Shaulis filed his UPEPA motion to dismiss (which had not yet been filed as of the time of this opinion). Shaulis also answered Paucek's complaint with a counterclaim under the UPEPA. All of this led to the opinion in Paucek v. Shaulis, 2025 WL 1298457 (D.N.J., May 6, 2025), that you can and should read for yourself here, and which we will next review. The first question addressed by the court was whether the New Jersey UPEPA would be recognized in federal court. The issue here is that the Federal Rules of Civil Procedure (FRCP) already provide a means for the early dismissal of a case, which is by way of a Rule 12(b)(6) motion to dismiss. If a defendant attaches evidence to a Rule 12(b)(6) motion, then that motion is converted to a motion for summary judgment under Rule 56. As I have often written, a special motion to dismiss or strike under the UPEPA is essentially an early summary judgment motion and akin to a "motion to dismiss on steroids". In fact, the UPEPA deliberately uses the summary judgment standard to test whether the plaintiff's complaint should be dismissed because that standard is well-understood by the courts and has already withstood constitutional challenges based on the plaintiff's right to a jury trial. So, the question becomes: if the Rule 12(b)(6) motion to dismiss is already employed by the federal courts, then why substitute it with the UPEPA? The answer is twofold. First, in diversity of citizenship cases (as here), the federal courts will apply their own procedural rules but they are also required to apply the substantive rules of the state from where the action arises. This is known as the Erie doctrine, after a 1938 U.S. Supreme Court opinion of that name. But there is an important limitation, being that if the state substantive law "is in direct collision" with the federal procedure on some issue, then the federal procedure will govern that issue. Second, there are some differences between a Rule 12(b)(6) motion and a UPEPA special motion, mostly being the UPEPA special motion triggers a stay of discovery and the UPEPA automatically awards attorney fees to a defendant who successfully asserts a UPEPA special motion. A Rule 12(b)(6) motion does neither of these things. This is not the first time that a federal court has addressed whether the state law UPEPA should apply in the federal courts. In fact, throughout the nation, the state law UPEPA has been asserted in many federal court cases. The problem is that the federal courts have not all agree on the outcome, but rather there has been a split of opinion by the various federal circuits. The Fifth, Tenth, Eleventh and D.C. Circuit Courts of Appeals have held that Anti-SLAPP laws do not apply in federal court, while the 1st and 9th Circuits have held that they do. For its part, the Second Circuit has opinions going both ways, but with the latest opinions stating that Anti-SLAPP law do not apply in federal court. Obviously, the U.S. Supreme Court is eventually going to have to step in and resolve this split of decisions among the Circuits, but we're not there yet. The District of New Jersey, where this case was heard, sits in the 3rd Circuit which hasn't ruled yet on the issue. The court here declined to look at the issue as merely being one of whether an Anti-SLAPP law should apply in federal court or not. Rather, the court thought that the correct analysis was whether a particular Anti-SLAPP law (here, New Jersey's UPEPA) through its text and structure was in conflict with the Federal Rules of Civil Procedure. This would be the analysis to be followed by the court. To this end, it was obvious to the court that some provisions of the UPEPA do indeed conflict with the FRPC. One example is that of the UPEPA mandating that a defendant who successfully brings a UPEPA special motion will be awarded attorney's fees. By contrast, the FRPC instead requires that before such attorney fees can be awarded, a successful party would have to prevail on either summary judgment or at trial. This means the defendant must prove that the plaintiff has no case, which is different than the UPEPA which requires the plaintiff to establish that he can make at least a prima facie case to avoid dismissal. Other conflicts of the UPEPA with the FRPC include an immediate appeal of right to the defendant if the UPEPA special motion is unsuccessful, and also the automatic stay of discovery upon the filing of a UPEPA special motion. So, there were conflicts between the UPEPA and the FRPC where their provisions collided. But that did not mean to the court that the entire UPEPA would be disallowed in federal court, but rather only that the conflicting provisions of the UPEPA would be surgically excised and in those places the federal rules would be substituted in their stead. This is known as "severability" and it is essentially the same process as where the illegal provisions of a contract are cut out but the surviving operating provisions will be enforced. This is the approach that has been followed by the Second and Ninth Circuits, which allows a court to enforce the state Anti-SLAPP procedures where they do not conflict with the federal rules, but replace those procedures with the corresponding federal rule where they do conflict. Now the court returned to the Erie doctrine which, it will be recalled, requires a federal court sitting in diversity jurisdiction to apply state substantive law but federal procedural law. Thus, it would only be the procedural parts of a state's Anti-SLAPP laws, including the UPEPA, that would be replaced by the federal rules. The substantive parts of the state's Anti-SLAPP laws would survive and be utilized under the Erie doctrine. This brought the court to one of the questions before it: Was the UPEPA's mandatory award of fees to a defendant who successfully asserted a UPEPA special motion to be considered substantive or procedural in nature? Under the Erie doctrine, a fee-shifting provision is typically considered to be substantive in nature because it is tied to the outcome of the litigation (a procedural rule is not). But there are times when a fee-shifting provision would be procedural, such as when such fees are awarded because of a party's bad faith conduct ― but that is not tied to the outcome of the litigation. Because the UPEPA's mandatory fee award is tied to the outcome, since it can only be awarded if the defendant prevails on the UPEPA special motion, the court held that the UPEPA fee-shifting provision is substantive and not procedural. But the UPEPA in fact has two fee-shifting provisions. As mentioned, the first provision awards attorney fees to a defendant who wins on the UPEPA special motion. This is different than the second provision, by which a court has the discretion to award attorney fees to the plaintiff and against the defendant if the defendant filed the UPEPA special motion in bad faith or for purposes of delay. This latter provision is not tied to the outcome of the case, since the case continues if the defendant loses the UPEPA special motion, and thus is procedural in nature. The upshot to this is that if the defendant wins the UPEPA special motion, then the mandatory fee award in favor of the defendant is substantive and determined by state law. However, if the defendant loses the special motion then the issue of whether fees can be awarded against the defendant would be procedural in nature and determined if at all by the FRCP. The court also noted another factor in determining the UPEPA's mandatory fee award to be substantive: One of the purposes of that mandatory fee award is to deter the filing of abusive litigation. Disposing of a minor issue, the court also held that UPEPA relief is only obtainable through the filing of a UPEPA special motion and not by way of a counterclaim. The balance of the opinion deals with a conflict of law issue; namely, which state's Anti-SLAPP law would apply. The court ultimately concludes that the New Jersey UPEPA applies, and although the court's discussion of the issue is quite interesting, it is beyond the scope of this article. ANALYSIS Anti-SLAPP laws such as the UPEPA are indeed a mix of substantive and procedural law ― they are not purely one or the other. It therefore makes sense for the federal courts in applying the Erie doctrine to apply the substantive portions but reject the procedural ones. This may be the best that we get until the U.S. Supreme Court resolves the split between circuits (and that could go either way) or Congress adopts a federal Anti-SLAPP law (which is regularly introduced, but never seems to go anywhere). But in the words of the Rolling Stones: "You can't always get what you want. You get what you need."
