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I've seen the term PMI used a couple of times on this site and don't know what it is. What is it?

Ben Miller
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Gavin Miller
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2 Answers2

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Private Mortgage Insurance. It's money that you pay to an insurance company to make the lender whole in the event that you go into default. It's a real waste of money for you.

If you are trying to finance more than 80% of the value of a home, a standard mortage is likely to require that you get PMI. Nowadays there are other options which involve paying substantially more interest.

duffbeer703
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Yes, PMI is what the lender requires to loan you more than 80% of the home's value. I could easily present scenarios where it's exactly the right decision to use PMI and get the purchase done. A 100K mortgage at 90% LTV will cost you $521/year in PMI. If you are renting and struggling to get a higher downpayment, it can take quite a long time to save the additional $11K to put down. Only the buyer can know if the house is such a bargain, or if rates have bottomed, but the decision isn't so clear cut.

Ben Voigt
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JoeTaxpayer
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