Mortgage insurance, or PMI, has had an unfair rap ever since the media grabbed the topic 10 years ago and beat the life out of it. Every client thereafter spit out the same warning when we met.
I don’t want PMI!
Ok, I get it. So, most of us started doing the 1st/2nd combo loans that eventually became so popular. Structure an 80% 1st , put a 2nd behind it for the rest….and presto, no MI! And we’d still be doing them now except that those high CLTV 2nds are mostly gone.
There are times however when PMI, or MI as we now call it these days, makes more sense. And years ago, Congress required lenders to remove MI after 20% equity could be proven with an appraisal. Values were rising so quickly then that MI could typically be shed after a couple of years.
Last year tax deductible mortgage insurance was legislated by Congress for those with Adjusted Gross Incomes under $100k per year, removing even more of the disincentives. Still, the stigma lingered…