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How to Avoid PMI

Posted by: raindrop 4 years, 11 months ago

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Private Mortgage Insurance is not always required, even if your down-payment is less than 20%.  Some lenders won't request a PMI, so be sure to look around and compare alternatives.

Another option is using an "80-10-10" loan. This program involves two loans and a 10% down-payment, and 90% financed. Of the 90% financed, there is a first mortgage equal to 80% of the sale price, and a second mortgage for the remaining 10% of the sale price. The second loan has a higher rate, but since it only applies to 10% of the total loan, the monthly payments on the two mortgages are still lower than paying one mortgage with PMI.

What if your home value has increased?
When making mortgage payments, most of the initial payments are finance charges.  Therefore, it can take 10 to 15 years to pay down 80% of the loan.  However, if your property value increases, due to rising home prices in your area or home improvements, you may reach the 80% mark a lot faster.  If you think your home value has increased, you may be able to cancel PMI on your mortgage.  Although the new law does not require a mortgage servicer to proactively consider the current property value, you should contact them to see if they are willing to do so.  Also, be sure to ask what documentation may be required to demonstrate the higher property value.

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