A Mortgage You Must Check Out–A Small Down Payment and No PMI!

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Posted 1-30-19  A Mortgage You Must Check Out

During a delightful coffee break today with Ben Sparrenberger from Peoples Trust and Savings Bank, he told me Peoples offers a conventional mortgage that requires only 10.1% down payment and no PMI.  What’s the big deal, you may ask?

PMI is private mortgage insurance.  It protects a lender in case you stop making payments on you loan and end up in foreclosure.  Since it’s protecting the bank against your potentially bad behavior, you, the borrower pay for it. (No surprise!)

Lenders usually require PMI as part of a conventional loan, because there is no government insurance as there is with FHA or VA loans (FHA = Federal Housing Administration and VA = Veteran Affairs).  PMI is usually required if your down payment is less that 20% of the cost of the house.

PMI is calculated as a percentage of the loan amount.  So, let’s assume you borrow $150,000, and the rate is 3% a year.  The total premium is $450 a year.  So, the loan product Ben was talking about is a great deal for someone without the cash for a big down payment.  It will save you thousands over the life of your loan!  That’s a big deal!