What is private mortgage insurance (PMI)?

Private Mortgage Insurance (PMI) is a form of insurance that helps protect lenders from loss in the event of a borrower defaulting on their mortgage loan. It is typically required when a borrower’s down payment is less than 20 percent of the home’s purchase price. PMI is paid for by the borrower to the lender and can be either a one-time fee, a monthly premium, or both. In North Carolina, the borrower is responsible for paying premiums to the lender, although the lender may pass some of these costs onto the borrower. PMI is a form of protection for lenders in the event that a borrower fails to repay their mortgage loan on time. It is important to note that PMI does not protect the borrower; it only protects the lender. The borrower will be responsible for repaying the full amount of the loan, plus any late fees or legal costs associated with a default. PMI also helps to reduce the risk of credit losses for lenders, allowing them to lend to borrowers with less money down. By reducing the risk of losses, lenders are able to offer lower interest rates and larger loan amounts, making mortgages more accessible to borrowers with less upfront capital. When considering a mortgage loan in North Carolina, it is important to understand the implications of PMI. It is important to factor the cost of PMI into your monthly mortgage payments, as it can add up over time. Additionally, many PMI policies have a termination clause that can eliminate the need to pay it once the loan-to-value ratio reaches 80 percent. Be sure to read the terms and conditions of the PMI agreement closely so that you understand any limitations or termination requirements.

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What is private mortgage insurance (PMI)?

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