## When Is Private Mortgage Insurance Required?
Private mortgage insurance (PMI) is a type of insurance that protects the lender in the event that the borrower defaults on their mortgage. PMI is typically required when the borrower makes a down payment of less than 20% of the home’s purchase price.
There are a few different ways that PMI can be calculated. One common method is to charge a percentage of the loan amount, typically between 0.5% and 1%. For example, if you have a $200,000 loan, you could pay between $1,000 and $2,000 in PMI each year.
PMI can be a significant expense, so it’s important to factor it into your budget when you’re shopping for a home. If you’re not sure whether you’ll need PMI, you can talk to your lender. They can help you determine if you qualify for a loan without PMI and how much you’ll need to pay if you do need it.
### When Is PMI Required?
PMI is typically required when the borrower makes a down payment of less than 20% of the home’s purchase price. However, there are some exceptions to this rule. For example, PMI may not be required if the borrower has a good credit score or if they are buying a home in a rural area.
### Benefits of PMI
There are a few benefits to having PMI. First, it can help you qualify for a loan with a lower down payment. Second, it can protect the lender in the event that you default on your mortgage. Finally, PMI can help you build equity in your home more quickly.
### Drawbacks of PMI
There are also a few drawbacks to having PMI. First, it can be an expensive expense. Second, it can make it more difficult to sell your home in the future. Finally, PMI can prevent you from getting a second mortgage or refinancing your home.
### How to Get Rid of PMI
There are a few different ways to get rid of PMI. One way is to make extra payments on your mortgage each month. This will help you pay down your loan principal more quickly and reach the 20% equity threshold. Another way to get rid of PMI is to refinance your home. If you have a good credit score and your home has increased in value, you may be able to refinance into a new loan with a lower interest rate and no PMI.
## Conclusion
PMI can be a helpful tool for borrowers who are not able to make a down payment of 20% of the home’s purchase price. However, it’s important to understand the costs and benefits of PMI before you decide if it’s right for you.