TD Bank Survey Finds Private Mortgage Insurance Impacting Buyers' Home Purchasing Decisions

Sixty Five Percent of Home Buyers Felt Private Mortgage Insurance Had More Impact on Mortgage Payments Than Originally Expected

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TD Bank

May 29, 2014, 10:00 ET

CHERRY HILL, N.J., May 29, 2014 /PRNewswire/ -- Research released today by TD Bank, America's Most Convenient Bank^®, revealed that 37 percent of those who purchased a home in the past 10 years – and 43 percent of those who did so within the last two years – required mortgage insurance (MI). Of those who required PMI (Private Mortgage Insurance), 65 percent said that the addition of a mortgage insurance premium left them paying a higher monthly mortgage payment than they originally expected.

The study, which is an extension of the 2014 TD Bank Mortgage Service Index, surveyed more than 2,000 Americans who have purchased a home in the past 10 years. The findings indicate the growing impact PMI has on mortgage payments, which is often required when home buyers are unable to make a 20 percent down payment to purchase a home. With average PMI costing approximately $100 per month, mortgage insurance can become a significant expense for many borrowers before they reach 20 percent equity in their property. Further, FHA loans now require PMI for the life of the loan which considerably increases the total cost of home ownership for borrowers who cannot make a 20 percent down payment.

"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," said Michael Copley, Executive Vice President, Retail Lending, TD Bank. "While FHA loans may be available, home buyers, especially first time buyers, may not realize the options available to them that don't require PMI insurance. TD Bank's Right Step program, for example, calls for only three percent down and does not require PMI. Prospective buyers should meet with a lender or financial institution to find a loan solution that meets their needs and monthly budget."

The TD Bank survey also revealed that:

Twenty-seven percent of those who purchased a home within the last 10 years felt that PMI costs impacted the home they purchased. For those who purchased a home in the last two years, that number increased to 35 percent.
Fifty-three percent of respondents reported experiencing a negative impact because of the additional cost of PMI. Over four in ten of those requiring PMI reported having to cut back on small and daily purchases and / or larger household purchases.

Generations are Feeling the Pinch

The TD Bank survey also found that 43 percent of Millennials (ages 18-34) did not make a 20 percent down payment and required mortgage insurance, as compared to 37 percent of Gen X-ers (ages 35-54) and 23 percent of Baby Boomers (ages 55 and older).

Regardless of age, respondents felt that the impact of PMI left them paying more than expected – 60 percent of Millennials, 60 percent of Gen X-ers and 58 percent of Baby Boomers.
Compared to Gen X-ers and Baby Boomers, Millennials requiring PMI felt most impacted in home purchasing decisions, such as delaying the purchase of a home or purchasing a smaller home (30 percent vs. 18 percent for Gen X-ers and 14 percent for Baby Boomers).
Forty six percent of Millennials responded that they've had to cut back on small / daily purchases and / or cut back or delay larger household purchases due to the additional cost of PMI, while 38 percent of Gen X-ers and only 26 percent of Baby Boomers experienced similar cut backs when requiring PMI.

TD Bank's Right Step mortgage program is designed to provide qualified home buyers with an alternative to Federal Housing Administration (FHA) backed loan products. The program features a low three percent down payment option and does not require PMI. Qualified borrowers can take advantage of the recent updates to the program which eliminates median income requirements making more borrowers eligible to take advantage of Right Step. To qualify for a loan under the updated Right Step program, borrowers must be purchasing a property in an area that is defined as low to moderate income or have an income within 80% of the median area income as determined by the U.S. Department of Housing and Urban Development (HUD).

To learn more about TD Bank, America's Most Convenient Bank, stop by a store, or visit us at www.tdbank.com. For more information on home financing or to find a local mortgage advisor visit www.tdbank.com/mortgageserviceindex.

About Angus Reid Public Opinion
Angus Reid Public Opinion is the Public Affairs practice of Vision Critical—a global research company. Vision Critical is a leader in the use of the Internet and rich media technology to collect high-quality, in-depth insights for a wide array of clients.

About TD Bank, America's Most Convenient Bank
TD Bank, America's Most Convenient Bank, is one of the 10 largest banks in the U.S., providing more than 8 million customers with a full range of retail, small business and commercial banking products and services at approximately 1,300 convenient locations throughout the Northeast, Mid-Atlantic, Metro D.C., the Carolinas and Florida. In addition, TD Bank and its subsidiaries offer customized private banking and wealth management services through TD Wealth^®, and vehicle financing and dealer commercial services through TD Auto Finance. TD Bank is headquartered in Cherry Hill, N.J. To learn more, visit www.tdbank.com. Find TD Bank on Facebook at www.facebook.com/TDBank and on Twitter at www.twitter.com/TDBank_US.

TD Bank, America's Most Convenient Bank, is a member of TD Bank Group and a subsidiary of The Toronto-Dominion Bank of Toronto, Canada, a top 10 financial services company in North America. The Toronto-Dominion Bank trades on the New York and Toronto stock exchanges under the ticker symbol "TD". To learn more, visit www.td.com.

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SOURCE TD Bank