What is PMI?
PMI (private mortgage insurance), is usually required by lenders if you do not put down, at least, 20%. If you get a loan which requires a lower down payment, you will probably be required to add this coverage in. What does PMI do? It products the lender in case you default on your note. It does not protect the borrower, but it protects the lender. Do I need to write that again? PMI protects the lender in case you default on your mortgage.
Why Avoid PMI?
This may seem like a small price to pay if you do not have a twenty percent down payment. In fact, it may be the best – or only – option for some buyers. However, in these days of mortgage problems, you may want to take at some reasons to avoid this coverage if you can.
Cost of PMI
This coverage usually costs about 1% of the loan value every single year. If you have a $200,000 loan, you are paying $2,000 a year to protect your mortgage company. That is very generous of you. But if you feel the need to donate money, I can suggest several charities [...]
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