Q:Â What is PMI (Personal Mortgage Insurance)?
A: When purchasing your first home or future home and your down payment is not significant, you will most likely pay PMI Personal Mortgage Insurance.Â If you do not have up to 20% equity in the property you are purchasing, your lender will require you to pay Personal Mortgage Insurance.Â This is fee can be added into your monthly mortgage payment or sometimes paid in advance.
This Personal Mortgage Insurance is protecting the lender not you.Â In case you would default on your mortgage, your lender would be compensated. Once you have 20% equity, you often times, can get your PMI payment removed.
Here is some additional information to give further explanation:
“Personal Mortgage Insurance offers protection only for the lender. This insurance pays off the lender in the event the borrower defaults on the mortgage. Lenders generally require PMI whenever the down payment on a purchase is less that 20 percent of the purchase price. PMI premiums can be expensive. Usually, advance payment of the first year’s premium is due, in one lump sum, upon purchase. A monthly premium is then added to the mortgage payment”