What is Private Mortgage Insurance?
Private Mortgage insurance, or PMI, is insurance built into your monthly payment that protects the lender against the risk of default. Default is when you do not pay your monthly payment. It may seem like a scam, but it’s a necessary entity to allow buyers to purchase homes with little or no down payment. When the lender feels protected they are more willing to loan out the money so you can buy a home.
How Long Do I Need Mortgage Insurance?
This timeline varies by mortgage product. As an rule of thumb you will have mortgage insurance for the first 10 years of your loan, or when your “loan to value” exceeds 20%. (If you don’t know what Loan To Value is, ask here) You can generally expect to have mortgage insurance for 10 years if you are not overpaying your mortgage or putting down a 20% down payment.
How Do I Avoid Mortgage Insurance?
You can avoid paying this monthly debt by using one of our No down payment loans or using a 20% down payment.
How Much Is Mortgage Insurance?
This varies by several factors, including your credit score, the downpayment you do put down, the loan amount and the zip code. Typically mortgage insurance on a $200,000 home will range between $90.00 – $141.00.
If you want to know more, here is a good video that explains why mortgage insurance exists:
Of course if you have further questions, please ask here.
Thanks for reading!
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