Private Mortgage Insurance (PMI)

Private mortgage insurance, or PMI, is insurance that protects the lender against default and comes into play when less than 20% is put down on the home. If a borrower doesn't pay their loan then the PMI company reimburses the lender for a percentage of the loan so the lender has less risk of loosing money. The insurance company charges a fee for this insurance and that fee is passed on the borrower. The benefit to you as a borrower is it allows you to purchase a home with less than 20% down.

There are ways to avoid private mortgage insurance today. You can do a 80% first mortgage and a second mortgage for the difference between the first mortgage and your down payment. The second mortgage interest rate will be a little higher than the first but the benefit to you as a borrower is interest is tax deductable. The combined payment of the first and second will usually still be equal to or less than the payment with PMI.

You can also borrower up to 95% in one loan with out PMI with an increased interest rate. Once again the benefit to you is interest is tax deductable.

For more information on PMI you can click on the following link and find more information than you ever wanted to know about private mortgage insurance (PMI). www.privatemi.com

If you would like to know more about this topic or speak to a mortgage officer who can help you with your home loan needs, please contact us by clicking here.

Interested in more helpful tips and articles? Click Here.

Return to the Top