Thread: What's the point of PMI?
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Old 01-05-2006, 07:08 AM
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No the purpose of the 80/20 is to avoid PMI so it is not charged on that type of loan.

PMI protects the lender from loss. Say the lender forecloses. They sell the home at sheriff's sale. The winning bidder pays 85k for a home with a 100k mortgage.

PMI covers the gap. It is almost like GAP coverage on a car. (How about that Rick!)

When a buyer eliminates PMI they are eliminating the premium they pay to the PMI Company. It is like an insurance premium a borrower pays in addition to the mortgage principle and interest payment (Or interest, or 1% option arm payment)

Make sense Alvin?
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