PMI - Private Mortgage Insurance March 17
A PMI or Private Mortgage Insurance is a type of insurance required from people who obtain loans with less than 20% down. In other words if you plan to purchase a $300,000 home and don’t put down (300,000 x 20%=) $60,000 as a down payment you will be required to pay a PMI. A PMI protects the lender if the homeowner/borrower defaults on his payment and allows the homebuyers to buy a home with as little as 5% down payment. A PMI usally varies from 0.19% to 0.9% of the total loan value.
For homebuyers who have lesser than the 20% down payment, they might want to look into a 80 20 mortgage to avoid the PMI. In a 80 20 mortgage the homebuyers can obtain a second loan for the 20% and apply it against the original 80% loan as down payment.