FAQ: What is PMI?

PMI is Private Mortgage Insurance. If you have one mortgage loan for the house that is over 80% of its assessed value, most lenders require you to pay PMI to protect them (the lender) in case you default on your loan. It is not required if you make a down payment on a home of at least 20% or if you have a 2nd mortgage loan (often called a “piggyback loan”) so the primary loan is at 80% or less.

I am seeing many of my buyers obtaining loans with PMI because the cost of this insurance is less than the interest on a piggyback loan. This is a drastic change from even a couple months ago. During the runup in housing earlier this decade, paying for PMI was nearly unheard of – it was cheaper to get a piggyback loan.

The cost of PMI can be paid separately as part of closing costs or can be integrated into the mortgage. It may be tax-deductible. FHA and VA loans have other requirements that may result in not having to pay for PMI.


“Wayne is a great REALTOR®!” But he is not an attorney or CPA. Any information and advice he provides are to the best of his ability and understanding, but is not guaranteed. If any topic is of importance to you in your home buying or home selling needs, please consult your attorney or CPA. If you need a referral to a qualified professional, please let Wayne know. He loves serving his community and will be glad to recommend those he has worked with.

Questions answered in this column were asked by my clients, past clients, or prospective buyers and sellers. The questions were answered when they were asked, and they were notified if the question is a candidate for the FAQ column. Questions are chosen based on interest to a wider audience, timeliness to the current market, and possibly other factors. Those whose questions are featured in this column get a gift card to their favorite store, restaurant, mall or movie theatre in the Tri-Valley area if they allow me to publish their name or initials and the city in which they live in this column. You can email your questions for a prompt response to changhomes@gmail.com.