Pros and Cons of PMI

PMI stands for Private Mortgage Insurance.  Basically, PMI protects your lender in case you default on your loan.  You’re required to have PMI until you pay off 20% of your home loan.  If you google PMI, you’ll see that there’s a lot of advice to avoid PMI if possible.  So what do you need to know about PMI?

 

Pros of having PMI:

  • PMI allows you to buy with a lower down payment. Yes, a bigger down payment allows you to avoid PMI… but PMI allows you to buy the house you love with a lower down payment.  It’s all about what you need.  If you’re not in a rush, you can save – but if you know this is the house and you need to put in an offer – PMI will allow you to do that whether your down payment is 5% or 15%.
  • PMI allows you to keep more money in the bank. Again, this is about what you decide when you evaluate your finances.  Do you need some money in reserve for repairs and future expenses?  Would paying a little PMI for a time allow you to feel more secure?  It’s a tool for your use as you look for your perfect home.
  • PMI doesn’t last forever. What’s nice is no matter what you decide, PMI doesn’t last forever.  Once you pay off 20% of your home, you can remove your PMI.  So you can always strategize how much you pay and how quickly you can stop your PMI payment.

Cons of having PMI:

  • PMI is an extra premium. PMI is an extra payment that you’re going to have to pay on top of your normal mortgage payment – and you don’t get it back.
  • PMI rates vary. Sometimes it’s not a bad idea when the rates are low – but sometimes when the rates are higher, it doesn’t seem worth it.
  • PMI doesn’t protect you. It protects the lender. So ultimately, you’re paying a premium for the lender – but if you end up in a bad spot, it doesn’t bring any benefit to you.  Which sounds like a bummer no matter how to say it.

 

So what will you decide?  Take a look at your finances and talk to your lender.   You can discuss what kind of a loan you could be approved for and what your budget is – and whether PMI is a good choice for you.  Don’t have a lender?  Give us a call!   We’re a Christian Mortgage Lender who values faith and family.  We’d love to help.

 

Best,

Audrey

The Christian Mortgage Mom

Audrey

2018-11-02T10:12:43+00:00