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Private Mortgage Insurance Good or Bad

February 25, 2016

There seem to be a lot of questions about how private mortgage insurance (PMI) really works.


PMI is a mandatory insurance required on some types of home loans. It allows the lender to provide home buyers, and people looking to refinance, to exceed 80% financing that most conventional lenders won't lend above. PMI insures the lender against loss in the event a home owner stops making payments on their mortgage loan.


Having PMI allows the home buyer to obtain a home with less money down, and refinance with less than 20% equity. This means you can own your home sooner, sometimes years earlier by cutting out the time needed to save a large down payment of 20% or more. Many people save for years, but because of unforeseen expenses that eat into that savings, it can feel like they will forever be caught in never ending loop of renting. This can be frustrating to think you may forever be paying the landlord's mortgage off for him, instead of your own. Having PMI means the extra cash not needed for a down payment can then be used to do home improvements immediately after purchase, or to keep an emergency fund or just maintain a healthy savings account. PMI allows you to invest in your future now, and begin building equity in your home as a smart investment plan for you and your family's financial future.


And remember, PMI is not permanent! As soon as your home grows in value -home values are quickly on the rise again - and the mortgage balance decreases, it's not long before you will have more than the 20% in home equity required to eliminate your PMI.


PMI is another option which makes a lower down payment possible- and in our opinion, a very attractive option!



Ron Meyer
GSF Mortgage Corporation
300 Patriot Dr.
Little Chute, WI 54140
(920) 788-9608
NMLS #222688 & 1018