5 min. read by Jason Gelios REALTOR®️
PMI or Private Mortgage Insurance is insurance placed on a mortgage that is over 80% loan to value. This means if a borrower does not put 20% down on the loan they will have to pay mortgage insurance.
Buyers who don’t put 20% down are considered higher risk by the lender. Private mortgage insurance provides extra protection for the lender should a borrower default or not pay on the mortgage.
Although even if that happens the lender will still pursue the borrower for the money owed.
One way to avoid PMI is to put at least 20% down. A more common way is to purchase the home with PMI and look at where values are a year or so after. If values rose to where you would show 20% equity above what you owe on your first mortgage, you could refinance to have PMI removed.
Jason Gelios is a Husband and Father. After that, a Top Producing REALTOR®, Author of the book Think like a REALTOR®, Creator of The AskJasonGelios Real Estate Show and an Expert Media contributor.