PMI - What is it and is it recommended???

[Jonah Stiles]

Background: I just met with a "mentor" of mine the other day talking about if real estate is right for me. He asked me why I haven't invested yet and I told him I was saving for a down payment. My mentor then suggested PMI and to insure my mortgage "with no money down"

Question: I've never heard of PMI before. What is it and is it recommended? I assume it takes from cash flow? Just wanted to know the positive or negatives and whether it's better to save for a down payment or go the PMI route.

Thanks for the help on my first ever post!

[Jakob Breidenbaugh]

Jonah as other have answered what PMI is, I will answer if it worth it. It depends is the answer. You need to work it into your numbers. I have PMI on my first house and now my second house. I am currently refinancing to get rid of PMI after less than 3 years because of forced appreciation and appreciation. In my case, I paid PMI for under 3 years and was able to get into a $317k house with $11k plus closing costs. Now that I am getting rid of PMI, I have healthy cash flow (I was breaking even with PMI initially after management, cap ex, etc). I still have PMI on my primary residence, but will work on getting rid of PMI when it seems right. Do the numbers and make sure you can afford it. Once again this has to be your primary residence for at least 1 year, so I would make sure you can afford it by yourself if you do not have any tenants. I would also recommend to look for a place that needs some work, so you can work on it over time to force appreciation and get out from under PMI faster.