PMI: Private Mortgage Insurance

PMI, or Private Mortgage Insurance, is special insurance that lenders mandate of higher risk borrowers to protect the interests of a bank in case of default. PMI is only required in particular circumstances, such as when you are borrowing more than eighty percent of your home’s fair market value.

If at all possible, try to avoid PMI. Be creative by taking out a second mortgage to buy your home or borrowing your down payment. PMI does not contribute towards your equity or benefit you in any way. If you currently have PMI, strive to get it removed. PMI can be removed from your mortgage once you reach twenty percent in equity.