Private mortgage insurance, more commonly referred to as simply PMI, is a must if you purchase a home and put down less than 20 percent of the cost of the home as a down payment.
What is PMI?
Private mortgage insurance is a special insurance that is designed to protect the lender should you default on the home loan for your St. Johns County real estate. For many home buyers – especially first-time home buyers – PMI is a small price to pay for owning a home.
Although PMI will likely make up just a small portion of your mortgage payment each month, it is required by lenders when a down payment does equal at least 20 percent of the cost of the St. Johns County real estate.
How long will I have to pay PMI?
In general, if you take out a conventional mortgage, your lender will drop your PMI when you have reached at least 20 percent equity in your home. Chances are your lender will not prompt you when this time comes, so it is important to keep a close eye on your home’s value and equity. In addition, if you perform home improvements that increase the value of your home, it is wise to have your home appraised once the improvements are completed, as you may have likely hit the 20 percent equity toward which you are working.
Finally, if you move into an area that is experiencing swiftly increasing property values, you will likely reach that 20 percent milestone much quicker.
Must I pay PMI?
Depending on your lender, you will likely be required to hold PMI insurance. Luckily, if you purchase a home and are able to put at least 20 percent of the home’s value down as a down payment, you will not need to worry about PMI. Although PMI may be a bit of a nuisance for many home buyers, it should not deter you from purchasing a home, as the benefits of homeownership certainly outweigh the cost of PMI.
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