Home ownership is something that many people in America want, but something that can be a process to attain. Quite often, one of the most difficult things for people to achieve is saving up the down payment that financial institutions require before they approve a mortgage. For many buyers, the down payment amount is typically 20% of the value of the property. This can be unrealistic for some, particularly for first time buyers trying to get their first home.
Fortunately for those in this situation, Private Mortgage Insurance (PMI) is an option to help you reach the 20% down payment amount while also helping to satisfy the lender. But exactly what is private mortgage Insurance?
PMI is a type of insurance provided by financial institutions or private insurance companies to buyers. Just like other types of mortgage or conventional loan insurance plans, they protect the lender in case the buyer is unable to maintain payments. This added protection gives financial institutions a lot more peace of mind and means that they are often much more likely to approve a mortgage without the full 20% down payment at the time of signing.
What Are The Benefits of Private Mortgage Insurance?
In addition to helping buyers get approved, there are a number of other benefits of PMI for the buyer.
First, it’s easy. PMI payments are usually included directly in your monthly mortgage payment along with the principal, interest and any taxes or other insurance fees. That means there are no extra payments to make or bills to worry about and also no new company to worry about, since you’ll often be dealing with the same financial institution for your mortgage and your PMI policy.
Second, you don’t need to keep it for the lifetime of the mortgage. PMI is generally only needed where a 20% deposit was not available. This means that once your accumulated payments reach 20% of the loan amount, you can chose to end your PMI payments. Many PMI policies will even automatically end when you reach this milestone, but make sure you discuss this with your broker.
If you’re thinking about buying a home and want to learn more about Private Mortgage Insurance and how it can help you, download our helpful eBook now!