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Understanding Private Mortgage Insurance (PMI)

Posted by Joseph A. DiPiazza | Feb 15, 2023 | 0 Comments


Private Mortgage Insurance (PMI) is a type of insurance that many homebuyers are required to purchase when they do not have a large enough down payment to secure a conventional mortgage. PMI helps protect the lender in case the borrower defaults on the loan, and is typically required when the down payment is less than 20% of the home's value. In this blog post, we will explore PMI in more detail and provide some key insights to help you better understand this important aspect of the homebuying process.

Why Do Lenders Require PMI?

When a homebuyer puts down less than 20% of the purchase price, the lender takes on a greater risk. If the borrower defaults on the loan and the property is foreclosed upon, the lender may not be able to recoup the full amount of the loan by selling the property. PMI helps to mitigate this risk by providing the lender with a guarantee that a portion of the loan will be paid off in the event of default.

How Does PMI Work?

PMI is typically added to the monthly mortgage payment, and the cost of the insurance can vary depending on the size of the down payment, the loan amount, and other factors.

It is important to note that PMI only protects the lender in the event of default, and does not provide any protection for the borrower. If you are considering purchasing a home with a down payment of less than 20%, it is important to carefully consider the additional cost of PMI when calculating your monthly mortgage payment.

How Can You Avoid PMI?

One way to avoid PMI is to make a larger down payment. If you are able to put down 20% or more of the purchase price, you may be able to secure a conventional mortgage without PMI. However, this may not be feasible for all homebuyers, especially in high-cost housing markets.

Another option is to consider a piggyback loan, which involves taking out two mortgages – one for 80% of the purchase price and another for the remaining 20%. This can help you avoid PMI, but may result in higher interest rates or other fees.


Private Mortgage Insurance (PMI) is an important consideration for homebuyers who are not able to make a down payment of 20% or more. While PMI can add to the cost of a monthly mortgage payment, it can also help make homeownership more accessible to those who may not have a large enough down payment saved up. If you are considering purchasing a home with a down payment of less than 20%, be sure to carefully review your options and consult with a trusted real estate attorney. Joseph DiPiazza, Esq. has years of experience working with all types of mortgages, including those that involve Private Mortgage Insurance. Please reach out if you have any questions or concerns related to the purchase or sale of a home.


Have a question about PMI? Get in touch with a skilled real estate lawyer in River Vale at The Law Office Of Joseph A. Dipiazza. Contact us online or dial (201) 494-2800 to schedule a consultation.

About the Author

Joseph A. DiPiazza

Joseph DiPiazza, Esq. is a highly accomplished real estate lawyer with a wealth of experience specializing in residential real estate transactions.


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