What Is PMI And Do I Have To Pay For It?

PMI stands for private mortgage insurance. PMI is a costly insurance premium that the borrower pays to protect the lender from the borrower defaulting on the loan. A borrower is required to pay PMI unless the borrower puts 20% or more down on their home loan or refinances greater than 80% of their home's value.

With the right loan this doesn't have to be an obstacle. In fact, with my No PMI loan you can avoid having to pay this and can still put as little as 5% down on your new home.

How Costly is Private Mortgage Insurance?

PMI will increase your monthly payment but may be tax deductible*. The cost of PMI varies depending on the amount of money you put down or the amount of equity left in your home after you refinance. PMI will generally calculate out to be about one half of a percent of your total loan amount. .

For example let's say you're going to refinance your current mortgage. Your home is worth $200,000 and your new loan amount is going to be $180,000. This means your loan-to-value will be 90% and you will require PMI. We multiply your total loan amount ($180,000) by .62 and come up with $1116 a year. We then divide that amount by 12 to find out what your monthly payment will be. In this case it would add almost $93 to your monthly payment.

* Always consult a professional tax advisor

Conclusion

You may still have questions about PMI. You can contact me and I will answer any questions you have, and are more than happy to walk you through the entire mortgage process.