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Categories - Copywriting - Shopping - Free Online Business Help - Telecommunications
Services
Articles: Real Estate - Avoid Private
Mortgage Insurance
By Max
Hunter
PMI - a recurring, monthly, unwelcome guest. It
sounds similar to and is about as welcomed as a similar acronym. PMI
is private mortgage insurance. This insurance policy is paid for by
the homebuyer when the amount of their primary mortgage is greater
than 80% of the value of the property.
You will note that
the term "primary mortgage" was used. This is for a specific reason.
It is not the total of all mortgages and home loans on the property
that is evaluated, but rather the amount of the primary or largest
mortgage on the property that can trigger PMI.
PMI is
calculated by taking 0.5% of your primary loan balance and dividing
it by 12 (12 monthly payments). For example, if your primary
mortgage is $200,000 and you are required to pay PMI, your mortgage
payments would be an additional $83.34 per month. For most
homebuyers, this additional premium is a considerable financial
burden to undertake.
There are ways around PMI for those
homebuyers unable to put down 20r more on their new home. Mortgage
lenders have created loan packages which include two or more home
loans that when combined exceed the 80 hreshold, while no one of the
loans exceed that threshold. Typically there is a primary mortgage
and either one or two home equity loans taken out simultaneously
which are 81 100or sometimes more) of the home value. This affords
the homebuyer to put less than 20 own, or perhaps put nothing down
at all while at the same time eliminating the need to pay PMI.
If you know you are going to be putting less than 20 own on
the purchase of your home you should immediately speak to your home
lender about avoiding PMI. A good home lender will inform you about
these types of packages. Though the rules on these packages may
differ from state to state, the vast majority of states allow for
these types of loan packages.
When you review this type of
package you will note that there will invariably be a different
interest rate on the mortgage than there is on the home equity
loan(s). The mortgage rate may have a slightly lower interest rate
or perhaps even a considerably lower interest rate. You should be
able to calculate what the monthly payments would be for the
combined loans and then determine if it comes out less than a single
mortgage with PMI. Obviously, a good lender is only going to present
you the package if the payments are cheaper than a single loan with
PMI.
You are able to refinance the loans at any point and
combine them into one payment. You would only do this when the value
of the home is more than 20
bove of the amount you will mortgage.
As the value of your home increases through home improvements or
time, you can receive an appraisal and speak to your home loan
professional to determine if refinancing the loans into one loan
makes sense.
These types of loans are often referred to as
80-10-10 loans or 80-15 loans, among other names. An 80-10-10 loan
is a mortgage at 80% of the amount to be financed and than two home
equity loans at 10% each. You will likely find that all three loans
will have a different interest rate with this type of package. 80-15
loans are similar but would be the main loan at 80 and a secondary
loan at 15.
Max Hunter is the
author of many credit related articles. If you are looking for help
with Home Loans or any type of credit issue please visit us at
http://www.homeloanave.com
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