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What is PMI Insurance for?

When we applied for our home and again when we refinanced they explained we didn't have 20% equity so we had to get PMI insurance it was a few hundred per payment. They explained it was so if we defaulted the bank would not be out. So now I am confused if these loans had PMI insurance then why is the bank out money? Or is PMI something else and these loan officers didn't explain it right?

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Anonymous

Asked by Anonymous at 12:45 PM on Nov. 24, 2008 in Money & Work

Answers (7)
  • PMI = Private Mortgage Insurance. You are insuring the bank gets their money back....not from you, but from an insurance company. So you pay, and you get nothing for it. You're buying an insurance policy that only the bank will benefit from.
    EireLass

    Answer by EireLass at 12:52 PM on Nov. 24, 2008

  • The previous poster has it right on! So now you can see what a total waste of money this is for you. It doesn't benefit you in the least. Try real hard to put extra money towards your principal so that you can pay it down to the point where you can ask to be released from those PMI payments. I'm not 100% certain, but it might be when you have paid off 25% of the principal. I may be in your paperwork.
    slw123

    Answer by slw123 at 1:15 PM on Nov. 24, 2008

  • To clarify my question a little. It stems more with these banks saying they are about to collapse because of all the people defaulting. I know 9 out of 10 people I asked had PMI insurance. So if you have PMI insurance wouldn't it be the insurance companies collapsing vs. the banks? I don't know the more I read about the bailouts the more I think the federal government is being taken for an expensive ride.
    Anonymous

    Answer by Anonymous at 1:19 PM on Nov. 24, 2008

  • Subprime mortgages did not have PMI. If that answers your question.
    Anonymous

    Answer by Anonymous at 1:43 PM on Nov. 24, 2008

  • Subprime mortgages usually dont have PMI, because the insurance co. sees them as too big a risk. Something all those banks should have done also! PMI is just a scam IMO, but as a previous poster said, try to get your balance down so that you can be released from the PMI payments.
    customcat2000

    Answer by customcat2000 at 1:50 PM on Nov. 24, 2008

  • This is not for all mortgage companies.... so whoever reads this please know, not all mortgage companies are the same!!!!
    tyree08

    Answer by tyree08 at 8:18 PM on Nov. 24, 2008

  • PMI has been around for years. It's not just b/c of the current market. The first poster has it right. I refused to get PMI on my mortgage. Not sure if that's still an option, though.
    Anonymous

    Answer by Anonymous at 10:43 AM on Nov. 25, 2008

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