 |
 |
 |
           |
 |
 |
 |
|
 |
 |
|
|
|
 |
How to Avoid Paying Mortgage Insurance
In today's world, a borrower should not be paying mortgage insurance (PMI) on their home mortgage with a few exceptions such as an FHA loan. Mortgage Insurance is a thing of the past. Let's first explain what mortgage insurance is. A lender requires a borrower to pay mortgage insurance if the loan amount is greater than 80% of the value of the home on a single loan. The reason this is the case is the loan is not sellable in the secondary financial markets as it does not meet certain guidelines. As a result, the lender makes you pay for their insurance in the event you default on the loan. The insurance will cover the lender for the balance of the loan plus expenses. The problem for borrowers is that mortgage insurance is expensive?..sometimes $100 or more per month. Fortunately in today's mortgage world, we have legal common ways to avoid paying mortgage insurance in most cases. Let's say you are a first time home buyer and only have 5% to put down on a condo or house. A mortgage professional should do two loans for you. A First Mortgage Loan in the amount of 80% of the value of your home and then a Second Mortgage for the remaining 15% of the loan balance. This would be called an 80/15/5 (80% 1st Loan, 15% 2nd Loan, 5% Down) The question you ask is why? Well, by doing two loans your payment every month will be cheaper so take a look at this example to see why. For example, let's say you had 10% to put down, we would do a 1st loan at 80% and then a 2nd loan at 10%. The 2nd loan will always carry a higher interest rate, but when you break the numbers down, it's cheaper from a payment point of view to have the two loans. Here is a $180,000 loan at 6% fixed rate for 30 years. Option 1 with PMI Option 2 with 2nd note and no PMI In this example, the borrower will save $67 per month by not paying Mortgage Insurance (PMI) Depending on the type of loan, the Second Mortgage often times can have an interest only option where your payment would even be less on a monthly basis. The downside to this solution is your not paying down the principle on your 2nd mortgage, however if you're a first time home buyer with limited cash flow, this would be a viable solution for you. A mortgage professional should lay out the various options for you in writing so you can make an educated decision as to the best solution for you. If your currently in a loan with mortgage insurance, then you need to speak with a mortgage professional immediately so your not wasting money on a monthly basis. Your mortgage professional should provide an analysis to determine if doing the transaction is feasible for you with consideration of some closing costs. (Per the FHA, all FHA loans require mortgage insurnace if the loan is 80% or greater. the mortage insurance will remain in effect for a period of 5 years. If after the 5 years and your loan balance has fallen below 78% of the value of your home, you will be eligable to stop paying mortgage insurance. Douglas Boncosky is a Mortgage Professional and Author. Doug has published a number of articles, guides and books including the 50 page book, "First Time Buyers Guide to a Stress Free Home Buying Process" Doug is Personal Mortgage Advisor for Smart Mortgage Access, a Schuamburg, IL based mortgage broker. Doug is also Founder & Executive Director of The Advisors Club, a organization exclusively for Chicago area Real Estate Professionals. For more information, please contact Doug at http://www.dougboncosky.com
MORE RESOURCES:
Mortgage-Refinance - Google News |
|
|
|
RELATED ARTICLES
Flexible Mortgages - Offering Relief from the Fixed Mortgage A pension mortgage may seem lucrative at the first sight. However, they seldom are, if the customers who took pension mortgage are to be believed. How to Get a Cheap Homeowner Loan If you're looking for a cheap homeowner loan, you might be wondering what you can do to reduce the amount that you have to pay.The simplest answer lies in two things? shopping around to find the lender that offers the lowest interest rates on a cheap homeowner loan, and maximizing the value of your loan against the equity in your home that's being used as collateral. Adverse Credit Mortgage Loan - Persistence is the Key to Getting Approved People with bad credit that are looking to get a home mortgage loan or to refinance their existing home mortgage loan, know how difficult of a job it can be to try and get approved. Adverse credit history can mean a little more legwork to get an approval for a mortgage loan, and especially to get a decent interest rate. Mortgage Loans Explained In Plain English With the many different kinds of mortgage loans out there, choosing the right one for your needs can be a difficult task. The following points will help you understand the pros and cons of the different types of mortgage loans available to you. Home Loans Buying a home remains the great American dream. Home ownership rates have been exploding in recent years, spurred on by the historically low interest rates in the home mortgage market. 2nd Mortgage - Better Than Refinancing You have probably received refinancing offers in the mail or advertised online touting your ability to pull out your home's equity. But a 2nd mortgage, also called an equity loan, may be a better financing option than refinancing your mortgage. Homebuyers Loan Guide If you are a homebuyer, there are a few points on a homebuyer's loan that you should keep in mind. These pointers simply ensure that you don't burden yourself with a loan or repayment and that you can get a justified return on your investment. Mortgage after Bankruptcy - Bankruptcy Discharged Yesterday? Purchase a Home Today! So you have been through a bankruptcy and surely have been told to wait at least two years before applying for a home loan. Waiting two long years without any guarantee of being approved for a mortgage after bankruptcy can be disheartening. How to Shop Around for the Cheapest Mortgage Deal Online Before you start shopping around for a mortgage, you need to establish exactly what you want so that you do not waste your time looking at deals that will not save you money. You should also learn how to compare mortgages or choose what features of the finance package are important to you. Home Loans and Mortgages - Time to Consolidate Loans? Home equity loans and lines of credit are useful tools for homeowners. They allow the homeowner to borrow against the value of his or her home for all kinds of purposes - home improvement, debt consolidation, vacations, and more. What is a Current Account Mortgage? Current account mortgages are fairly new to the sector. They are quite different to other types of mortgage as they enable you to set off all your savings and debts in one single account. Home Equity Loans - 5 Useful Application Tips Obtaining a home equity loan does not have to be a major ordeal. Unlike your first mortgage, you are already in the home, and usually time is not such a major factor. Home Loans and Mortgages - The Myth of Tax Deductible Interest Home ownership has risen sharply in recent years, and the percentage of Americans who own their own homes is approaching a record seventy percent. That's a good thing; we'd all rather live in our own home than consider the alternatives. Mortgage Reduction Solutions USA ECONOMIC CONDITIONSToday's sluggish economy has left millions of people struggling to financially make ends meet. Lou Dobb's coined phrase "Assault on the Middle Class" continues. The Real Truth About Those: Online Get a Better Loan Web Sites - 6 Things to Look For You have seen the Commercials on TV go this or that web Site and Refinance your Home and Save thousands. Tempting isn't it? Do they really save you money?But what if you need help or Advice? What if you have questions? Can an online Internet Robot Design a Mortgage Plan customized for your unique situation. Why You Should Not Get Hung Up on the Interest Rates!! This is what a mortgage can do for you!AND Why you shouldn't get hung up on the interest rate!Let me show you the bottom line or the total dollar amount you will pay when paying a mortgage and paying rent and what the benefits of a mortgage are:Let's say John bought a home and has a $75,000 mortgage @ 10% interest for 30 years on his home with a payment of $750.00 per month. Unlock your Home Loan Piggy Bank With the recent sharp increase in property values your current home could be a pot of gold.Property prices have increase about 20% - 30% over the past year but according to economists this current boom will not continue or much longer despite recent changes in property taxes announced in the budget speech. Home Loans and Mortgages - Beware of New "Mortgage Elimination" Scam The booming real estate market has allowed many Americans to become "equity rich." They may not have a lot of cash on hand, but they might have equity in their homes worth several hundred thousand dollars or more. Home Equity Loans A home equity loan allows you to cash-in on the equity you have built-up in your home. The funds you receive can be used for debt consolidation, home improvement, college education, investments or any purpose. Home Equity Loan Information - How to Use One Wisely Using a home equity loan to get out of debt or make improvements to your home is usually a smart move. You have earned the equity, so it only makes sense that you put it to good use.
|
 |