wHAT IS PRIVATE MORTGAGE INSURANCE (PMI)?Answer: It's a money-suck out of your budget. You never see it back. It's like $100 to $200 that you pay each month until you have 20% equity in your property. The bank, on top of getting thousands of dollars in interest upfront from you, adds this cost to serve as insurance for them in the event that you default on your loan (can't pay anymore!) The thinking is that once you have 20% equity, you'll be less likely to walk away from the property. You can avoid PMI by putting 20% down. Or using unique strategies that I counsel my clients on how to put just 3.5% down and then remove PMI less than a year later.
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