Northlawn Financial, Inc.

 

Private Mortgage Insurance (PMI) is insurance that protects a lender in the event that a homeowner defaults on a loan. Most lenders require a 20 percent down payment. PMI allows those who are unable to pay 20 percent to take out a mortgage by insuring the lender against the risks of foreclosure. PMI charges vary depending on the size of the down payment and the loan, but they typically amount to about one-half of one percent of the loan. If a borrower stops paying on a mortgage, the insurance company ensures that the lender will be paid in full. Mortgage companies pick insurance providers for their customers, but the borrowers pay the actual premiums. Usually, they do so in monthly installments. Some lenders offer programs whereby the borrower pays the entire insurance premium in a lump sum at closing. Mortgage insurance premiums are not tax deductible.