Private Mortgage Insurance
Published: Thursday, September 05 2013
In the mortgage industry, most lenders and loan programs want you to make a down payment of at least 20% on whatever home you are looking to purchase. Not everyone can do that, therefore, certain loan programs exist where a borrower can put down less than 20% and still receive financing. The caveat is , with these types of loans, comes something called Private Mortgage Insurance (“PMI”). Basically PMI is a percentage amount you pay, based on your total loan amount each month that insures the lender in case you default on your loan. While this mortgage insurance is usually fairly high, it is the only option for some home buyers.If you have purchased a home and are currently paying monthly mortgage insurance, you may be wondering how long you will be paying that insurance or how you can stop paying it all together. Sadly, the only way to get rid of PMI is to have at least 20% equity in the home, meaning that the amount you owe is 80% or less of the total home value. Even with a HARP loan, unless you have that 20% equity, you will still find yourself paying PMI. The best solution is to take a look at your budget and find ways to be able to increase your mortgage payment each month so that you can get yourself into that loan to value range more quickly. Once you have at least 20% equity in your home, you can execute a refinance, drop off that PMI and likely lower your interest making your monthly payment significantly lower. These tiny victories are all part of what makes being a home owner so attractive and at RP Funding, we are committed to educating consumers to be smart home buyers. Feel free to give us a call at (321) 397-4420 to discuss your options and help you make the decision that works best for you.
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