The article discusses the evolving perception of private mortgage insurance (PMI) among borrowers, historically seen as a burden but now viewed as an advantageous financial tool. With private mortgage insurers lowering rates, PMI allows first-time homebuyers to make smaller down payments (as low as 3% or 5%) while protecting the lender in case of default. PMI is a temporary cost, with mandatory cancellation once the mortgage balance drops to 78% of the home's value. Alternatives like piggyback loans may cost more overall, making PMI a more practical choice now than in the past.
While many borrowers traditionally avoid private mortgage insurance (PMI), recent reductions in its rates may make it a viable option for first-time homebuyers.
PMI protects lenders—not borrowers—when the latter default, but it allows homebuyers to secure loans with lower down payments, which can be financially advantageous.
Even before PMI is canceled by law, borrowers can request its removal once their mortgage balance drops to 80% of the home’s original value.
Borrowers have previously resorted to alternative methods to avoid PMI, such as piggyback loans, but they often incur higher costs with these options.
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