What is Private Mortgage Insurance (PMI), and why do I need it?
In most cases, if your first mortgage amount is greater that 80% of the property’s value, the lender will obtain Private Mortgage Insurance (PMI) to safeguard its investment against the possibility of default. The PMI premium is collected monthly along with the mortgage payment. As your equity increases, you may qualify to have PMI removed. There may be ways to finance your home so that PMI is not required. Your loan consultant can provide you with more information.
Private Mortgage Insurance (PMI) is obtained by the lender, but paid for by the borrower. It insures the lender against loss in the case of foreclosure. If the borrower is putting less than a 20% downpayment on a purchase or has less than 20% equity for a refinance, the lender will require private mortgage insurance. This allows the lender to take the risk of lending when the borrower has less equity in the property.
