Private Mortgage Insurance (PMI) is a type of insurance that protects lenders in case a borrower defaults on their mortgage payments. It is typically required for borrowers who make a down payment of less than 20% on their home purchase. PMI allows borrowers to secure a mortgage even if they don't have a substantial down payment, but it does come with additional costs.
Private Mortgage Insurance, commonly called PMI, is an insurance policy that safeguards lenders in the event of borrower default. It provides financial protection to the lender, allowing them to recover a portion of the outstanding mortgage balance if the borrower fails to make payments. PMI is typically required when the down payment is less than 20% of the home's purchase price.
Several factors influence the cost of PMI and the duration for which it is required:
Private Mortgage Insurance plays a crucial role in expanding homeownership opportunities for individuals who may not have a substantial down payment saved. It enables borrowers to secure a mortgage with a lower initial investment, making homeownership more accessible. In addition, PMI is an added layer of protection for lenders, reducing their risk in approving loans with higher LTV ratios.
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