What You Need to Know About Private Mortgage Insurance When Purchasing Brooklyn Real Estate

If you are on the verge of buying Brooklyn real estate, you’ve probably heard the term Private Mortgage Insurance (PMI). Mortgage professionals talk about it a great deal, but you may be asking, “What is it exactly? And why should I care?”

Private Mortgage Insurance Defined

PMI is required by lenders if the down payment of a purchase is less than 20 percent of the home’s value. It protects the lender if the borrower defaults on the loan. It also makes the lender more apt to loan, even if the down payment is as low as 3%, because in the long run, the lender’s investment is protected.

You Pay For It

Unlike other types of insurance which you pay to protect your interest in an asset, you pay Private Mortgage Insurance to the mortgage company to protect its interest in your new Brooklyn real estate. (Note that PMI is not usually tax deductible. Check with a tax professional for details. )

Make It Go Away: PMI Can Be Terminated Once You’ve Paid Down Your Loan

Once you pay down your mortgage to the point where it hits the magical 80% of the original purchase price or appraised value, whichever is less, you can request cancellation of PMI. The Homeowners Protection Act requires that loans made after 1999 include notifications to the borrower when you arrive at this point in your payments.

Your PMI payments must be automatically canceled once you pay down your loan to 78%. At closing, and on a yearly basis, you should receive information from your lender about when you can request cancellation.

Whether you’re ready to buy Brooklyn real estate or need more information before taking the plunge, I can help. Give me a call today Charles D’Alessandro Your Brooklyn real estate agent with Fillmore Real Estate at 718/253-9600 ext 206 or email me at [email protected],

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One Response to “What You Need to Know About Private Mortgage Insurance When Purchasing Brooklyn Real Estate”

  1. […] than 80% of your Brooklyn real estate’s fair market value, your lender will require that you pay Private Mortgage Insurance (PMI). PMI payments are expensive at about 0.5% to 1% of the entire loan amount on an annual […]

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