In a week and a half, I’m buying a condo.
I feel like I should take a bow.
Yes, I am excited. There’s a Pinterest board that my sister and I are sharing to pretend-decorate the new place. I’ve priced out some stupid shades from Ikea, that will be just fine until we find beautiful curtains that will really tie the room together.
I’ve signed 490 pieces of paper, both electronically and via PDF/fax/scan/email. I’ll be lucky if I don’t end up with a mail-order bride based on the sheer volume of things I’m signing that I haven’t fully scrutinized. For all I know, Andi is going to make me sign a piece of paper that states, “Andi is the bestest in the westest ever,” and I probably won’t even bat an eye.
One thing that did strike my attention, though, was Private Mortgage Insurance, or PMI.
What is PMI? (Private Mortgage Insurance)?
As far as I can tell, PMI is an expensive scam. It’s insurance that you pay if you don’t have 20% equity in your home. Insurance is all well and good, but this insurance is different. This insurance does not insure you, the homeowner, from anything.
Instead, you’re paying insurance to cover the bank’s butt, should you walk away from your home without 20% equity.
Also, it doesn’t just automatically disappear once you’ve hit the magical 20% threshold. No. You have to figure out who to call, figure out how to get that payment removed, how to get your own money back.
When I was looking, my mortgage guy showed me a loan where PMI was $225 a month, or … you know, more than a car loan!
And that’s just absurd.
Why do “They” Offer PMI, Anyway?
This is the part that really gets me. Clearly, allowing us to buy a house with less than 20% as a down payment is a nice thing to do. It opens up the possibility of home ownership to those of us who want to take advantage of these interest rates but are years away from having enough money to put down. I’m definitely in this boat, but due to the generosity of my parents, I don’t have to pay PMI.
I was talking to a friend about PMI, and she doesn’t see it as something so evil (to be fair, she was quoted $115 a month for PMI, verses the $225 a month that I was shown).
She said that in her family’s situation, PMI is a small price to pay for the ability to have cash around, in an easily-accessible bank account. I get that. I mean, as much as I get anything that someone who has a completely different life explains to me.
What’s the Point of PMI?
I think, honestly, PMI is set up as a deterrent to people who don’t yet have 20% saved. It’s another barrier. It’s like they’re saying, “okay, so you don’t have enough equity. We are going to make you pay an extra fee each month just so we know you’re serious enough to stick in this house until you’ve built it up.
Should you do it?
I wouldn’t. If I weren’t the luckiest girl in the world who is getting a gifted down payment, then I would be renting, not owning. It’s one thing to pay a homeowner’s association fee.
It’s quite another to pay insurance that doesn’t protect you.What about you? Would you get PMI? Would it depend on how much it cost? How much would you be willing to spend?