Category
What is Private Mortgage Insurance or PMI?
Answer
Private Mortgage Insurance (PMI) is a special type of insurance used in the mortgage industry. It covers the lender for a portion of losses the lender may suffer in the event that a borrower fails to repay their loan. In exchange for the reassurance and added financial security that the PMI coverage provides to the lender, the lender can then offer consumers more attractive and less expensive mortgages. The premiums to cover the cost of PMI are paid by the borrower or homeowner as part of the monthly mortgage payment, and they generally cost around $50-$150, depending on the amount of the loan. Once the borrower has at least 20 percent equity – by paying off the loan balance or coming up with a larger down payment – the requirement for PMI can be removed, saving the borrower the cost of PMI payments.
