People often ask me “Hey, what’s this PMI I see from the bank paperwork?” PMI stands for Private Mortgage Insurance. That is required by almost all lenders in situations where you as a buyer are not going to have equity at least equal to 80% of the value of the property typically the purchase price. So, by way of example, if you were buying a home for $100,000 using just simple numbers, your equity would have to be at least $20,000. If you’re equity wasn’t going to be $20,000, you’re required to obtain and pay for PMI (Private Mortgage Insurance). That would be unfortunate but of course, many cases, it’s just necessary. I say unfortunate because it’s expensive. It’s paid every month. It is part of your mortgage payment and you will continue to pay it indefinitely until such time that you can prove that your equity in the property is at least equal 20%. Now, that may or may not happen quickly. In some instances, it may never happen depending on values of real estate. So, to answer the question, “Do I need it?” you may. Should I try to avoid it, absolutely if possible and the way to do that is to somehow make sure that you have at least 20% equity in the property where you purchase it.
This informational blog post was brought to you by Marc N. Needelman, an experienced Hartford, Connecticut Real Estate Lawyer.
