You have probably heard the popular idea that you need a 20% down payment in order to buy a home. But if you aren’t financially prepared to put 20% down, you’ve may have been introduced to alternative ways of buying a home that will allow you to pull together a smaller down payment, even 0% down. It’s important to know what comes with other finance options, and specifically you should know about Private Mortgage Insurance (PMI). Here are three things you should know about PMI.
- What it is. Mortgage companies require PMI to mitigate their risk when accepting less than 20% down.
- How to cancel it. When you have at least 20% equity in your home, you can work with your mortgage professional to cancel your PMI, reducing your monthly expenses.
- It may be tax deductible. PMI payments could be tax deductible (which could save you hundreds of dollars a year.) Be sure to consult a tax professional about these benefits.