Private Mortgage Insurance (PMI) is a type of insurance policy. It protects lenders against loss.
This loss occurs if a borrower defaults on a mortgage.
PMI differs from mortgage insurance provided by the government. Government-backed insurances support FHA and VA loans.
PMI, however, assists in conventional loan arrangements.
PMI offers coverage that reduces lender risk. This risk pertains to loans exceeding 80% of a home’s value.
Loans such as those for luxury condos in Bangkok exemplify this scenario.
Lenders require PMI for high loan-to-value ratios. These ratios surpass the 80% threshold.
Examples include financing for high-end residential properties and commercial real estate in Bangkok’s central districts.
Common features of PMI include premium payments. Borrowers make these payments monthly.
Another feature is the coverage termination option upon reaching 20% equity, seen in both residential and commercial loans.
Unusual features of PMI encompass premium refunds. These refunds apply under certain conditions.
Another is the convertibility option to a lower premium upon achieving a better credit score, not commonly found in other types of mortgage insurance.
Unique to PMI is the coverage for investor properties. These properties include rental apartments in Bangkok.
PMI applies to both fixed-rate and adjustable-rate mortgages, a distinct aspect contrasting with government-backed options.
PMI stands out by not only aiding the purchase of primary residences but also investment properties and second homes. Such coverage spans across various types of properties, including upscale residential units and commercial spaces in Bangkok, offering a broader scope than FHA or VA loans which focus primarily on primary residences.
For more information on this and other real estate terms, visit our glossary about Bangkok real estate.