PMI isn’t just an inconvenience – it can harm buyers
CHERRY HILL, N.J. – June 2, 2014 – Research released by TD Bank and conducted by Angus Reid Public Opinion finds that 37 percent of buyers who purchased a home in the past 10 years – 43 percent of those within the last two years – required mortgage insurance (MI). Of those who required PMI (Private Mortgage Insurance), 65 percent said that it left them paying a higher monthly mortgage payment than they originally expected.
The study, an extension of the 2014 TD Bank Mortgage Service Index, surveyed more than 2,000 Americans. The findings indicate the growing impact that PMI – often required when homebuyers can't make a 20 percent downpayment – has on mortgage payments.
An average PMI payment costs about $100 per month, making it a significant expense for many borrowers who already don't have enough to make a minimum downpayment. To make matters worse, FHA loans now require PMI for the life of the loan, which considerably increases the total cost of homeownership.
"PMI has had a definitive impact on many homebuyers – including making them rethink or delay the purchase of a home in light of not being able to meet monthly mortgage payments," says Michael Copley, executive vice president of retail lending with TD Bank. "While FHA loans may be available, homebuyers, especially first time buyers, may not realize the options available to them that don't require PMI insurance."
According to Copley, one example offered through TD Bank's Right Step program calls for only three percent down and does not require PMI. Prospective buyers should meet with a lender or financial institution to find a loan solution that meets their needs and monthly budget."
Other survey results
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