Reviewed and approved by Samuel Corso, licensed Texas insurance agent.
Published · Updated
What is private mortgage insurance in Texas — and is it home insurance?
Private mortgage insurance, or PMI, has insurance in its name, so it can be mixed up with the policy on your house. This guide covers who PMI protects, when lenders ask for it, what the Texas Department of Insurance (TDI) says about cost and canceling, and who to contact with a problem.
The short version. In Texas, private mortgage insurance (PMI) protects your lender, not you, if you stop making mortgage payments, according to TDI's tip sheet on PMI. Homeowners insurance is a separate product, which TDI's title insurance tip sheet describes as protecting you from losses due to fire, weather, other types of property damage, or theft. So PMI is not home insurance.
Who PMI protects, according to TDI
Private mortgage insurance protects the lender on a home loan, and the borrower pays for it. TDI's tip sheet What is private mortgage insurance? Learn why you might need it opens with this sentence: "Private mortgage insurance protects your lender – not you – if you stop making mortgage payments."
TDI's property and casualty page Private Mortgage Insurance (PMI) adds detail. It says PMI protects the lender on a conventional mortgage in the event the borrower defaults and the lender forecloses on the property. On who pays, the same page says: "The premium for PMI is paid by the borrower and may be canceled once certain conditions are met."
For you, that means PMI and your homeowners policy answer two different questions. PMI is about what happens to the lender if the loan goes unpaid. Damage to the house itself is the subject of homeowners insurance, which has its own premium.
When lenders ask for it
Lenders may ask for private mortgage insurance when the down payment on a home is below 20%. TDI's tip sheet What is private mortgage insurance? Learn why you might need it says: "Most lenders require you to buy private mortgage insurance (PMI) if you make less than a 20% down payment on your house." TDI's page Private Mortgage Insurance (PMI) puts it a little differently, saying that with less than a 20% down payment when you purchase a home, you most likely will be required to purchase PMI.
The tip sheet also says the cost is usually folded into your mortgage payment, and that your lender will get the insurance for you and tell you about the terms during closing.
If you are unsure what yours say, your closing documents and your lender are the places to look.
If you're at the start of a purchase, our guide on home insurance when buying or selling a home in Texas covers the coverage side of the same timeline.
What TDI says it costs
TDI gives a range for the cost of private mortgage insurance and lists what the cost depends on. From the tip sheet What is private mortgage insurance? Learn why you might need it: "The cost of PMI coverage can range from 0.5% to 6% of the amount of your loan." The same page says the cost depends on your down payment, the type and term of your loan, and your credit score.
TDI's page Private Mortgage Insurance (PMI) words the range as anywhere from ½ of 1% to almost 6% of the principal amount of the loan, depending on the down payment, the type of loan (fixed or adjustable interest rate), the term of the loan, and the borrower's credit score or scores.
Neither page gives a figure for any one borrower. If the cost is folded into one mortgage payment, you may need to look at your statement or ask your lender to see what your own PMI comes to over a year.
When TDI says PMI can be canceled
Private mortgage insurance may be cancelable, and the details depend on the loan. TDI's tip sheet What is private mortgage insurance? Learn why you might need it says: "You can usually cancel the policy when the balance of your loan is 80% or less than the current market value of your home." The same page says your lender should tell you when you can cancel the insurance.
TDI's page Private Mortgage Insurance (PMI) says in general terms that your lender is required to notify you on an annual basis that it is possible to cancel PMI, and it sets out the notice wording in its section on conventional mortgages effective prior to July 29, 1999. It says this notification is often included with the information about the mortgage interest you paid and the disbursements from your escrow account, and that there should be an address and telephone number for the lender along with TDI's toll-free number, 800-252-3439.
The two TDI pages describe the cancellation point differently. The tip sheet refers to the current market value of your home. The page Private Mortgage Insurance (PMI) separates mortgages by the date they took effect, as set out below.
| Mortgage described on TDI's Private Mortgage Insurance (PMI) page | What that page says about canceling |
|---|---|
| Conventional mortgage effective prior to July 29, 1999, and not refinanced | The annual notice refers to a principal balance of 80 percent or less of the current fair market appraised value of the home, in most cases. The page adds that many lenders now seek 78%, which it says has been suggested by Fannie Mae if you reside in the home, and from 65 to 70% for rental property. |
| Some conventional mortgages effective July 29, 1999 or later | PMI would end when the principal balance is first scheduled, under the amortization schedule, to reach 78% of the original value of the property, or 77% for a high risk loan. The page also describes a cancellation option when the amortization schedule reaches 80% or the principal is paid down to 80% of the original value. |
| Mortgage backed by the Federal Housing Administration (FHA) or the Department of Veterans Administration (VA) | The page says there are other variations of this type of insurance that may not be canceled. |
In its section on conventional mortgages effective prior to July 29, 1999, TDI's page Private Mortgage Insurance (PMI) also says: "An appraisal will probably be required to cancel PMI." In that same section it suggests considering the valuation of similar properties in your neighborhood before paying for a professional appraisal, and contacting your lender first to determine what is required. For the later mortgages, the page says you should obtain a copy of the amortization schedule from the lender if it was not provided at closing.
On where to take the question, TDI's page Private Mortgage Insurance (PMI) says: "The lender is your best source for details regarding what is necessary to cancel PMI. TDI does not maintain mortgage information."
In plain terms, the percentage that applies to you depends on when your mortgage took effect, what type of loan it is, and what your lender asks for. That is why the first step is a question to the lender.
PMI, homeowners insurance and title insurance, as TDI describes them
Private mortgage insurance, homeowners insurance and title insurance can all come up around a home purchase, and TDI describes a different purpose for each one. The table sets out what TDI's pages say.
| Product | What TDI says it protects | What TDI says about paying for it | TDI page |
|---|---|---|---|
| Private mortgage insurance | Your lender, not you, if you stop making mortgage payments | The cost is usually folded into your mortgage payment | What is private mortgage insurance? Learn why you might need it |
| Homeowners insurance | You, from losses due to fire, weather, other types of property damage, or theft | You pay your homeowners premium every year | What is title insurance? Why do I need it for my new house? |
| Title insurance | You, from problems with an ownership title when you buy real estate. An owner's policy protects the homeowner and a loan policy protects the rights of the lender | You pay the premium one time, when you close on the sale of the property | What is title insurance? Why do I need it for my new house? |
Read side by side, the three products do different jobs. Our guide on how home insurance works in Texas covers what's inside a homeowners policy.
If your homeowners premium is paid through an escrow account, our guide on home insurance, escrow and your mortgage in Texas covers how that account works, and is home insurance required in Texas covers where that requirement comes from.
Who to call when something looks wrong
Private mortgage insurance involves a lender and an insurance company, and TDI says they have different regulators. From the tip sheet What is private mortgage insurance? Learn why you might need it: "The Department of Banking regulates lenders. TDI regulates private mortgage insurance companies." The page explains that to regulate means to license and to ensure laws are followed.
- A complaint about your lender. TDI's tip sheet What is private mortgage insurance? Learn why you might need it says to contact the Texas Department of Banking. TDI's page Private Mortgage Insurance (PMI) says complaints about a lender refusing to have the insurance company cancel PMI after the required criteria have been met should go to the appropriate regulatory agency. It says the Texas Department of Banking regulates state banks and has a Regulator Referral List on its File a Complaint page.
- A question for the lender. TDI's tip sheet What is private mortgage insurance? Learn why you might need it says the notice from your lender will have a toll-free number to call with questions.
- Not sure who to contact. The same tip sheet says that if you're not sure who to contact or have general insurance questions, you can call TDI's Help Line at 800-252-3439.
So the starting point depends on who the problem is with, and TDI's tip sheet gives its Help Line for when you are not sure who to contact.
The tax question
Whether private mortgage insurance is tax deductible is a tax question, and this guide does not answer it. Credify is an insurance agency, so a tax professional is the right person to ask about your own circumstances.
The related question about your homeowners premium is a different one, and we cover it in is home insurance tax deductible in Texas.
What to check on your statement this week
If you have a mortgage and are not sure whether you pay private mortgage insurance, these are steps you can take.
- Find out whether you're paying PMI. It may appear as a line on your mortgage statement or in your escrow breakdown. TDI's tip sheet What is private mortgage insurance? Learn why you might need it says the cost is usually folded into your mortgage payment.
- Work out the annual figure. Twelve months of the charge shows you what PMI comes to over a year.
- Look for the annual notice. TDI's page Private Mortgage Insurance (PMI) says in general terms that your lender is required to notify you on an annual basis that it is possible to cancel PMI, with the notice wording set out in its section on conventional mortgages effective prior to July 29, 1999, and that the notification is often included with your mortgage interest and escrow information.
- Ask your lender what applies to your loan. You can ask what conditions it uses for canceling PMI, what it needs from you, and whether your loan type allows cancellation. TDI's page Private Mortgage Insurance (PMI) calls the lender your best source for those details.
- Ask about an appraisal before paying for one. You can ask the lender whether one is needed for your loan.
- Keep your homeowners insurance separate in your mind. It is a different policy from PMI, and you can review it on its own schedule.
Key facts
- TDI's tip sheet What is private mortgage insurance? Learn why you might need it says private mortgage insurance protects your lender, not you, if you stop making mortgage payments.
- TDI's page Private Mortgage Insurance (PMI) says the premium for PMI is paid by the borrower and may be canceled once certain conditions are met.
- TDI's tip sheet on PMI says most lenders require PMI if you make less than a 20% down payment on your house, and that your lender will get the insurance for you and tell you about the terms during closing.
- The same TDI tip sheet says the cost of PMI coverage can range from 0.5% to 6% of the amount of your loan, depending on your down payment, the type and term of your loan, and your credit score.
- On canceling, TDI's tip sheet says: "You can usually cancel the policy when the balance of your loan is 80% or less than the current market value of your home." TDI's PMI page ties the cancellation point to the date the mortgage took effect and the type of loan.
- TDI's PMI page says that for conventional mortgages effective prior to July 29, 1999, many lenders now seek a principal balance of 78%, which the page says has been suggested by Fannie Mae if you reside in the home, and it describes separate provisions for some conventional mortgages effective July 29, 1999 or later.
- The same TDI page says other variations of this insurance may not be canceled if the mortgage is backed by the FHA or the VA, and that the lender is your best source for details on what is necessary to cancel PMI.
- TDI's tip sheet What is title insurance? Why do I need it for my new house? says homeowners insurance protects you from losses due to fire, weather, other types of property damage, or theft.
Sources: Texas Department of Insurance, What is private mortgage insurance? Learn why you might need it, Private Mortgage Insurance (PMI) and What is title insurance? Why do I need it for my new house?. This page is general information, not legal advice.
Take the next step
Private mortgage insurance and homeowners insurance are separate, so each one gets its own check. For PMI, the question goes to your lender. For the policy on the house, how much is home insurance in Texas covers what goes into that premium, and how home insurance quotes work in Texas covers how quotes are put together.
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