PMI

[tabitha]

Can anyone tell me about PMI. I read a little about it and thought it would be a good thing to stay away from. What are your opinions.

[Pendragon]

PMI is Private Mortgage Insurance.

Usually applied whenever you have less than 20% of your own funds in a property you want to buy. Pretty much every bank and mortgage company charges it. If you have less than 20% to put down, try your local credit unions.. They don't have to charge PMI, and many don't.

[rmurray]

PMI covers the lender losses if you fail to pay the payments..You can avoid PMI with 20% or more down...It will go away aftter your equity is up to 20%..usually in 8 or 9 years...If you are in a higth apprexciation area..often you can pay for an apprasisal a few years from nopw and prove your equity..then the bank will relieve you of the burden...

[TanyaF]

Another possibility is 80/20 loans, but they don't seem to apply to construction to perm loans.

[Mac]

Note about release of PMI! At least with my lender (Wells Fargo), PMI will not go away until 1) I request it, when I have paid 20% of the principal, or 2) automatically (Federal law) when I have paid 22%. I CANNOT get an appraisal, submit that, and have PMI removed. I would have to use the appraisal to refinance with (now) 20% down.

Just wanted to make that clear.
PMI is not deductable, as mortgage interest is. Some banks will set up a "silent second" mortgage to cover the other 20% of the value. The rate is higher than the main mortgage rate, but it MAY be less overall, since you can deduct it.