A Quick Look Into Private Mortgage Insurance

As you set forth on the home purchase loan process, there are many factors to consider. Here’s some quick help with one of them:

Private mortgage insurance (PMI) is extra insurance a lender may require you to buy if you’re handing out less than 20% of a property’s value as a down payment. Why is this the case? Because people who put down small amounts are more likely to default on a loan.

If you opt for mortgage insurance, once you’ve got 20% equity in your home, you should be able to cancel the policy.

An important thing to understand about PMI is that the 20% equity threshold relates to your home’s value, NOT necessarily 20% of the mortgage amount. If you receive a great deal and buy your home below market value; buy a fixer-upper and fix it up to increase its value; or pick a locale that suddenly becomes popular and rapidly appreciates in value, your mortgage amount might be very different from the value of your house.

If you are required to pay for PMI, keep tabs on the changing value of your home. Consult with a home mortgage broker to learn a lot more.