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What is PMI And How to Avoid It
Manage episode 389690298 series 3467161
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What is PMI And How to Avoid It
You want to work with a lender so that you don't need to purchase a property with all cash. The lender is willing to lend you money, charging you interest to make a profit, and ensuring there is a safety buffer of equity in case you default and they need to foreclose to recover their funds.
Your goal is to minimize the amount you need to invest in the deal to maximize your return on investment, but the lender requires a minimum down payment of 20% to feel secure in loaning you the money in case you default and they need to foreclose to recover the property and their money.
You insist on putting down less than 20%.
Reluctantly, they agree to let you put less than 20% down, but only if you purchase third-party insurance to protect them in case of default. You agree.
The third-party insurance company is offering private mortgage insurance (PMI), which is insurance you pay to protect the lender in case you default because you put down less than 20%.
In this mini-class, we will look at PMI, what it is, and how you can avoid it as a real estate investor.
Check out the video from this class here:
What is PMI And How to Avoid It - Video
In this class, James discusses:
- What is Private Mortgage Insurance (PMI) and why does it exist?
- What is PMI called for FHA loans?
- How to avoid paying PMI?
- Putting at least 20% down to avoid paying PMI
- Paying down on your loan to get rid of PMI
- Opting to take a higher mortgage interest rate instead of PMI
- Get a loan that doesn't have PMI at all
- Utilize the creative financing strategies that don't have PMI
- Plus much more...
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