Private Mortgage Insurance (PMI) is required by most lenders when a borrower puts down less than 20% of the total payment. It ensures the lender is guaranteed 80% of the loan by the mortgage insurer, should the buyer default. PMI premiums vary depending on the loan-to-value of the home, the type of loan, and the borrower’s credit scores.
PMI is tax-deductible for borrowers whose annual adjusted gross income is under $100,000. For those with income over $100,000. a tax advisor can determine what options are available for you.
One way to avoid paying PMI is to take out a second mortgage, such as an 80/10/10 loan (80% of the first mortgage, 10% of the second mortgage, and a 10% down payment).
Other lenders offer Lender-Paid PMI loans. Under this type of loan, the borrower’s interest rate is slightly higher, but the lender pays the private mortgage insurance. The interest rate on these loans is based heavily on credit scores and equity.
Prestige is here to assess your long-term goals and provide options that detail all of the pros and cons of every mortgage option available to you.