PMI

The Washington Post Sunday - - Real Estate -

K Private mort­gage in­sur­ance is of­ten re­quired by a lender when a buyer puts up less than 20 per­cent of the pur­chase price of a home for a down pay­ment. The buyer pays the pre­mium, though the lender is the one pro­tected if the buyer de­faults. The cost can be charged up­front or spread over the life of the loan. K A monthly ex­pense that in some cases can be dropped af­ter the loan-to-value ra­tio for a prop­erty reaches 80 per­cent. That hap­pens when the owner’s eq­uity goes up, ei­ther be­cause he or she has paid down the mort­gage or be­cause the home’s value has ap­pre­ci­ated. K A dif­fer­ent kind of in­sur­ance from that on loans backed by the Fed­eral Hous­ing Ad­min­is­tra­tion and other gov­ern­ment agen­cies, thus the “private” in the name. Pre­mi­ums on FHA mort­gages last for the life of the loan. K A prod­uct that many home­own­ers have com­plained that they have had dif­fi­culty can­cel­ing once they met the min­i­mum eq­uity re­quire­ments. K An ex­pense many cash-strapped bor­row­ers have avoided in re­cent years us­ing 80/20 or 80/10/5 loans. Un­der those loans, sec­ond mort­gages are “pig­gy­backed” onto the pri­mary mort­gages. K An op­tion that has be­come more at­trac­tive now that in­ter­est rates on some ad­justabler­ate sec­ond mort­gage loans have risen sharply. K A cost that home buy­ers with in­comes un­der $100,000 can now fully deduct on their in­come taxes — sim­i­lar to the way mort­gage in­ter­est is de­ducted — due to a law that went into ef­fect this year. That law was ef­fec­tive with in­sur­ance on loans closed on or af­ter Jan. 1; so far, it has not been ex­tended to cover in­sur­ance writ­ten af­ter this year.

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