The impact of PMI

Buyers who put down less than 20 percent are taking a hit when it comes to the cost of ownership

The American Dream — at what cost? Affording a down payment and monthly mortgage bill can be difficult enough, but borrowers who put down less than 20 percent often are left with the additional monthly expense of private mortgage insurance.

Thirty-seven percent of mortgage borrowers who purchased a home in the past 10 years — and 43 percent of those who did so within the last two years — required private mortgage insurance, according to a survey of 2,000 Americans by TD Bank, part of its 2014 Mortgage Service Index. Of those paying PMI, nearly two-thirds said the addition of PMI left them paying a higher monthly mortgage payment than originally expected.

PMI — approximately $100/month, on average, according to the TD survey — can be a significant expense for borrowers until they reach 20-percent equity in their home and PMI no longer is required. Fifty-three percent of the survey respondents reported experiencing a negative impact because of the addition of PMI to their monthly loan payment; four in 10 respondents reported having to cut back on either daily or large household purchases.

Who’s paying PMI?

The survey found that 43 percent of Millennials (those ages 18 to 34) did not make a 20-percent down payment on their homes, resulting in PMI, compared to 37 percent of Gen X-ers (ages 35 to 54) and under a quarter (23 percent) of baby boomers (those 55+).

Millennials felt the most impacted by PMI, according to the survey, with 30 percent saying it caused them to delay their home purchase or purchase a smaller home, and 46 percent saying they’ve had to cut back on purchases due to the cost of PMI.

Across the board, about 60 percent of all borrowers from all groups felt PMI left them paying more than originally anticipated.

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