Private mortgage insurance basics – What you should know
Author: Wills Smith discusses buying a house without a deposit
Private mortgage insurance is the insurance coverage that home buyers have to obtain if they are unable to make at least 20% of the home purchase price as down payment. In other words, this policy allows you to purchase a house by obtaining a loan that is more than 80% of the appraised value of your house. Lenders will choose the private mortgage insurance provider for you to protect them against loss in case you default on your home loan. The lender becomes the beneficiary but you have to pay the premiums.
What are the benefits of private mortgage insurance?
Private mortgage insurance is useful for you as a home buyer. It enables you to fulfill your dream of purchasing a house even if you do not have sufficient cash to put down 20% of your home’s value. When you agree to obtain this insurance, lenders will allow you to make down payment as low as 3% to 5%. It also protects your lender in case you are not able to repay you mortgage loan.
