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If you're planning to buy yourself a home, the term PMI will probably pop up on your radar. What is this term PMI, and what role does it play when it comes to house purchasing. PMI is an abbreviation for Private Mortgage Insurance. PMI is an insurance that is required to protect the lender in the case when the borrower defaults on their loan. Basically, PMI is generally required when a borrower has less than 20% equity, which means the homeowner is putting less than 20% down. And if it is a refinance and the borrowers do not have 20% equity in the property, it is required. The cost of PMI increases as your down payment decreases; this is a fact. Now whether to avail of this facility in the market or not is totally dependent on the customer and the borrower. There are advantages and disadvantages of taking a PMI but the basic question is what makes people go for PMI. A good point can be observed here; it often helps borrowers to be able to buy a house with a zero percent, five percent, or ten percent cash down payment. For example, suppose you want to buy a house and use a loan administered by Robert Diero at 105% of the cost of the house. It is even possible to finance the closing costs of a house that is less than $347, 200. Another advantage of a PMI is that it builds the insurance into the interest rate and allows the borrower to potentially get a tax write off. Private mortgage insurance does not give you additional homeowners insurance, but it gives the bank insurance just in case you do not complete your duty by not paying your payments. Earlier people weren't aware of this but the best part is that you can cancel your PMI after you have achieved 20% equity. Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price. Ultimately it increases the ability to deduct mortgage insurance helps more first-time home buyers purchase homes but it has its own drawbacks. The worst being it raises your monthly payment and since no tax is deducted from PMI, you end up paying more. Taking two mortgage loans when you buy a home is much better than going for PMI. Your first mortgage could be for eighty percent and the second mortgage could be for twenty percent. But in the end its the circumstances which govern the situation. PMI has its disadvantages but there's no doubt about the advantages it has. It has made it possible to dream for every American in the country. If you are looking to buy older homes in Nashville, contact our Nashville Real Estate agent. We also offer new construction in Nashville area.
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