Do I Need Private Mortgage Insurance? PMI Explained
If you’re buying a home traditionally, with a lender, but have less than a 20% down payment, you’ll have to pay a PMI, or private mortgage insurance, until you’ve reached 20% equity in your home. This is almost always required by the lending institutions to ensure that they receive at least 20% of the equity in the home, should you not be able to make any further payments. Here is PMI explained further.
Will the PMI Payments Last the Duration of Your Mortgage?
How does this affect you? Well, in quite a few ways. Having to pay principal, interest, PMI each month is quite expensive, which is why many have traditionally always put at least 20% into their home
from the beginning. This drops your monthly payment substantially, as it decreases the total amount borrowed and fully removes the PMI.
What Can I Do to Avoid Buying PMI All Together?
There are two ways to avoid that nasty PMI from increasing your overall monthly payments: put 20% down or get a VA loan. Since VA loans are backed by the government, you’re not required to purchase a PMI, or put more than 3.5% down.
The only way to avoid PMI is to have at least 20% or down or qualify for a VA loan, when ready to buy a home. The PMI will decrease as the principal balance on your mortgage
is paid off. Rates will vary depending on the insurance provider & policy, depending on your down payment and credit score