What you need to know about Private Mortgage Insurance

Private Mortgage Insurance or PMI as it is commonly known is an insurance policy which homeowners are required to purchase particularly if the down payment is 20 percent or less of the property value. The main aim of PMI is to protect mortgage lenders in case there is a default by the borrowers. The lender who takes PMI is benefited because he is able to buy property with low down payment. Some insurance companies also offer buildings insurance as a part of PMI. Earlier people who made low down payments found it difficult to get mortgages. However, with the advent of PMI the lenders are willing to give loans for property where low down payment is made because the insurance companies guarantee their payments.

The cost of taking PMI varies depending on the loan amount and the monthly down payment that make. It will be prudent on your part to keep track of the mortgage payments and inform the lender once the limit of 80 percent is reached. Some lenders require the borrower to pay PMI throughout the tenure of the mortgage. His usually applies to people with bad credit history. So visit your mortgage broker and find out the best PMI available at lowest possible premiums.