If you are in the process of taking out a mortgage and your lender is requiring you to purchase Private Mortgage Insurance, there are several things you need to know. Private Mortgage Insurance is expensive and can add hundreds of dollars to your monthly payment amount. Here are several tips to help you avoid paying this unnecessary expense or even drop Private Mortgage Insurance if you are currently paying it.
Private Mortgage Insurance is usually required for borrowers purchasing their homes with less than a 20% down payment. This insurance protects your mortgage lender from certain losses if you default on the loan. Private Mortgage Insurance is an unnecessary expense as there are loan programs that can help purchase your home without it.
80 / 20 Mortgage Loans & Private Mortgage Insurance
The easiest way to avoid paying Private Mortgage Insurance is to purchase your home using an 80/20 loan. 80/20 mortgages are actually two loans, one for 80% of the purchase price and a second loan for the remaining 20%. These loans are typically from two separate lenders; because your home is secured by two mortgages the interest rate on your second mortgage is typically higher. The advantage of using these two loans to purchase your home is that you will not be required to purchase Private Mortgage Insurance.
Mortgage Refinancing to Drop Private Mortgage Insurance
If you are currently paying Private Mortgage insurance on your existing mortgage, refinancing the loan could help you drop this costly expense. Private Mortgage Insurance is normally cancelled once you have 20 percent equity in your home; however, you do not have to wait this long. Mortgage Refinancing could save you a lot of money in Private Mortgage Insurance premiums.
You can learn more about your mortgage options, including costly mistakes to avoid by registering for a free mortgage tutorial.
2 comments:
I am not aware about this insurance policy. I just knew the basic one like home, life and health kind of insurance policy and have already taken them. After learning about this policy from the above information it is sounding me a nice option to take. I will consider it.
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Hmmm, so there's also overpaying in PMI. Good thing I have read this stuff. Although I lack the information of how PMI works.
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