How Home Buyers Are Impacted By Private Mortgage Insurance


TD Bank has found that private mortgage insurance (PMI) has affected home buyers' home purchasing decisions, as a large percentage of buyers felt PMI had more of an impact on mortgage payments than they had expected, according to the bank's survey results.

The research reveals that 37% of those who purchased a home in the past 10 years – and 43% of those who did so within the last two years – required mortgage insurance (MI). Of those who required PMI, 65% said that the addition of a mortgage insurance premium left them paying a higher monthly mortgage payment than they originally planned.

The findings demonstrate the growing impact PMI has on mortgage payments, which is often required when home buyers are unable to make a 20% down payment to purchase a home. With average PMI costing approximately $100 per month, mortgage insurance can become a significant expense for many borrowers before they reach 20% equity in their property, TD Bank explains.

Further, Federal Housing Administration (FHA) loans now require MI for the life of the loan – considerably increasing the total cost of homeownership for borrowers who cannot make a 20% down payment.

The results of the survey also showed that 27% of those who purchased a home within the last 10 years felt that PMI costs impacted the home they purchased. For those who purchased a home in the last two years, that number increased to 35%.

Fifty-three percent of respondents reported experiencing a negative impact because of the additional cost of PMI. Over four in 10 of those requiring PMI reported having to cut back on small and daily purchases and/or larger household purchases.

The survey also found that 43% of millennials (ages 18-34) did not make a 20% down payment and required mortgage insurance, as compared to 37% of generation X-ers (ages 35-54) and 23% of baby boomers (ages 55 and older).

The study, which is an extension of the 2014 TD Bank Mortgage Service Index, surveyed more than 2,000 Americans who have purchased a home in the past 10 years.

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