Mortgage Private Mortgage Insurance: 10 Things You Need to Know

What is Mortgage Private Mortgage Insurance (PMI)?

Mortgage private mortgage insurance (PMI) is a type of insurance that protects the lender in the event that the borrower defaults on their mortgage loan. PMI is typically required when the borrower makes a down payment of less than 20% of the purchase price of the home.

How Does PMI Work?

PMI is calculated as a percentage of the loan amount and is typically paid monthly. The cost of PMI can vary depending on the loan amount, the loan term, and the borrower's credit score.

Who Pays for PMI?

The borrower is responsible for paying for PMI. PMI can be added to the monthly mortgage payment or it can be paid separately.

When Can I Cancel PMI?

PMI can be canceled once the borrower has reached 20% equity in the home. This can be done by refinancing the mortgage or by making additional principal payments.

10 Things to Know About PMI

1. PMI is typically required when the borrower makes a down payment of less than 20% of the purchase price of the home.
2. PMI protects the lender in the event that the borrower defaults on their mortgage loan.
3. PMI is calculated as a percentage of the loan amount and is typically paid monthly.
4. The cost of PMI can vary depending on the loan amount, the loan term, and the borrower's credit score.
5. The borrower is responsible for paying for PMI.
6. PMI can be added to the monthly mortgage payment or it can be paid separately.
7. PMI can be canceled once the borrower has reached 20% equity in the home.
8. PMI can be a significant expense, so it is important to factor it into your budget when you are considering buying a home.
9. There are several different types of PMI, so it is important to shop around to find the best option for you.
10. PMI can be a valuable tool for borrowers who are unable to make a large down payment.

Tips and Tricks for Getting the Best PMI Deal

• Shop around for the best PMI rates.
• Get a lower interest rate on your mortgage.
• Make a larger down payment.
• Improve your credit score.

Common Mistakes to Avoid

• Don't assume that you have to pay PMI.
• Don't pay PMI for longer than you need to.
• Don't cancel PMI prematurely.

Conclusion

PMI can be a valuable tool for borrowers who are unable to make a large down payment. However, it is important to understand how PMI works and how it can affect your monthly budget. By following the tips and tricks in this article, you can get the best PMI deal and save money on your mortgage.

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