June 9th, 2014 9:46 AM by Jackie A. Graves
Sixty-five percent of home owners with private mortgage
insurance say that the additional cost of PMI prompted them to pay a higher
monthly mortgage payment than they had originally expected, according to a new
survey released by TD Bank of more than 2,000 Americans who purchased a home in
the past 10 years.
"PMI has had a definitive impact on many home buyers
– including making them rethink or delay the purchase of a home in light of not
being able to meet monthly mortgage payments," says Michael Copley,
executive vice president of retail lending at TD Bank.
Borrowers are required to get PMI if the loan exceeds 80
percent of the home’s value. The insurance protects the lender in case the
borrower defaults on their loan.
Many buyers say that PMI has an impact on their home
purchasing decisions. For example, 35 percent of people who purchased a home in
the past two years said that PMI influenced their decision of which house to
buy. Also, 53 percent reported facing a negative impact due to the additional
cost of PMI. About 40 percent of those surveyed said that having to pay PMI
forced them to curtail small and daily purchases or larger household
The survey showed that PMI is fairly common: 37 percent
of those who purchased a home in the past 10 years said they were required to
have PMI, and 43 percent in the past two years. Forty-five percent of home
owners aged 18 to 34 years old have PMI; 37 percent of home buyers aged 35 to
54 have it; and 23 percent of people older than 55 had required mortgage
insurance on their loans over the past decade, the TD Bank study found.
On average, home owners reported that PMI cost about $100
extra a month, according to the study.
Source: TD Bank and “Most Homebuyers Don't See This Cost Coming,” Credit.com
(June 2, 2014)
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