What is what is private mortgage insurance and who has to pay it? Should I buy a property even if I have to pay private mortgage insurance?
PMI or mortgage insurance is standard for loans where the loan-to-value ratio is greater than 80%. When your loan ratio goes below 80% then you can discontinue the mortgage insurance.
PMI rates vary based on your credit, the down payment, and the size of the loan—some borrows will have to continue to pay PMI since they have a poor credit history or have made a lower down payment on the property they've bought.
PMI is usally paid in a monthly premium to the lender along with your mortgage payment. PMI is there to protect the lender if you foreclose on the property. But really, it's a small amount of money to pay if you find the right property to buy.
Ideally, if you can save up for a downpayment, 20% of the total price of the property, that's the best way to go and you can then avoid paying PMI.
Are you a veteran? You don't have to pay private mortgage insurance on VA or veterans loans. So make sure to let your lender know that you are a vet and qualify for a VA loan and can avoid paying PMI. altogther.
Points are different than PMI.
Points are given to balance out a loan rate. If a borrower wants a mortgage at a lower interest rate, the lender might work with the borrower by giving the lower rate but requiring the borrower pay an upfront fee in the form of points. Four points is usually equal to half a point on the interest rate.
As a borrower you’ll need to figure out how much you’re saving or losing via points over the life of the loan in terms of interest. And, figure out if you want to pay money upfront or over the course of the loan.
PMI is not deductable.
As far as tax deductions, for PMI, which you have to pay if you don’t pay 80% of the loan, it's not deductible. Usually if you put 20% down you can avoid paying PMI. But the interest on your mortgage is of course deductible when you pay your taxes.