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Private Mortgage Insurance (PMI)

Private Mortgage Insurance (PMI)

What is Private Mortgage Insurance?

Private Mortgage Insurance (PMI) is a type of insurance lenders often require when the down payment is less than 20%. This insurance protects the lender from the borrower failing to pay the mortgage. Once your equity reaches ~20%, lenders may allow you to stop paying PMI.

Putting less money down as a down payment will often require you to purchase PMI with a higher premium given the perceived risk of nonpayment is larger. Since 2020, PMI expenses are considered tax deductible.

As a borrower, putting down a lower down payment may allow you to finance more property deals faster. Thus, depending on your situation, paying a bit extra for PMI may be advantageous.

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