 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
|
|
 |
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:
Google News |
 |
|
|
RELATED ARTICLES
Ten Things a Mortgage Processor Must Know to be Effective From time to time, we hear a story about a processor gone bad. A processor that seemed so knowledgeable early on but now isn't keeping pace and can't seem to get along with anyone. Keep Your Eye Focused on Treasury Bond Rates To Adjust Your Current Mortgage Rates Mortgage rates typically are based off the current rates of treasury bonds. Most lenders set their long term mortgage rates in line with 10 and 30-year treasury rates. First Time Buyer Mortgages - Transforming Homeless into Property Owners Having just settled in life, you are finding the rentals putting too much of a burden on your finances. Nevertheless, you continue the payments thinking that purchasing a home would be practically impossible. Mortgage-Refinance Treachery: Avoid Mortgage Bankers and Brokers Biggest Trick -- The Sales Pitch What the average homeowner or home buyer fails to realize is that bankers, loan officers, mortgage brokers, or whatever your lenders call themselves, are salesmen. Certainly, if you purchased your home from a realtor and used her lender, you most likely got a feeling of trust in that person, because the realtor referred him. Understanding a UK Commercial Mortgage In many ways a commercial mortgage is just like a residential mortgage in that you pledge real property as collateral against a loan to either buy or refinance that property. You can also receive a commercial re-mortgage and use it as a line of credit for any business purpose. Consolidate Debt With A Home Equity Loan If you are a home owner who is having to borrow from Peter to pay Paul due to a mounting debt load, a debt consolidation home equity loan may be the answer. A debt consolidation loan will allow you to consolidate your high interest credit card and consumer loans into one low rate, affordable monthly payment. Lesser Known Facts About Home Equity Loans Refinancing your debt via a home equity loan shifts your debts loan to your home. The flip side to such a move is that your home is on the line. Mortgage Questions to Ask Your Lender Buying and financing a home today can be overwhelming. Here are some questions to ask your lender so that you can make informed decisions. Home Loans and Mortgages - Watch Out for Dangerous Subprime Loans With the growing interest in real estate purchasing and speculation, more and more lenders are offering "nontraditional" types of mortgages. These include adjustable rate mortgages (ARM) of every shape and size, the more popular interest-only mortgage, and the very dangerous Option ARM mortgage, which can cause the amount you owe to actually increase as time passes. Renters Have Much to Gain by Pursuing Home Ownership Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. Home Equity Loans Company - 7 Key Questions to Help You Choose One Choosing the right home equity loan can be tricky; you have to consider interest rates and repayment schedules, among others. Choosing the right lender, however, does not have to be a difficult task. Home Equity Loan - Home Theater Adds Fun and Value In days gone by, the family typically spent their evenings watching television in the den or living room, crowded around a black and white television set that may have measured no more than nineteen inches in diagonal size. For decades, this scenario was pretty much the same in most American homes, with the only change being the replacement of black and white televisions with color models. Buying A Home After Bankruptcy - Get A Mortgage Loan After Bankruptcy If you have a recent bankruptcy on your credit and are looking to get financing for a home, there is hope. Buying a home with bad credit will just put more emphasis on the other two factors needed to get a mortgage loan, which are; income verification and a down payment. An Infinity Mortgage? Here in Spain the concept of a mortgage period of 20 or 25 years is something new. The general feeling by the banks is that want their money back more quickly than banks in countries in which they are accustomed to longer periods. Obtaining a Home Equity Loan Online Private lenders, banks, and mortgage companies are all setting up shop on the internet, and all make it possible to obtain a home equity loan online. Competition between lenders is stiff, so be sure to check a few companies that offer applications about their rates, products, and customer service. Applying for a Home Loan Applying for a home loan may not be the most exciting way to spend your time, but if you are like many potential homeowners, it is probably a necessary evil. If you have some knowledge of the process ahead of time, however, it will go much more smoothly. Reverse Mortgage Maximization Have your home's appreciation grow twice as fast.For Seniors over the age of 62 a Reverse Mortgage is a tool that, while new to many, is increasingly being used to maximize their retirement income. Home Equity Line of Credit or Second Mortgage Loan Online - Things To Do With Your Homes Equity If you are wanting to get a home equity loan, rates are still low enough that you may want to make use of that equity in your home. Do you need some ideas on what you could do to multiply your equity or make some extra money off of the capital that could be available to you?Here are some suggestions of ways to put the equity to good use when you go to take out a home equity or cash out refinance loan. Secured Lending - a Guide to Releasing the Value in Your Home The recent boom in house price values have made some homeowners more wealth than they could have possibly earned though working in their jobs, however what use is all that wealth if you can't get your hands on it until you've sold your house? The quickest and easiest way to unlock the increased value in your home is often a secured loan that will allow you to receive a lump sum upfront without having to move or remortgage your house.Why take a secured loan?Perhaps it's time to take that amazing touring holiday, perhaps it time to replace the kitchen or even build an extension to your home, with unsecured lending normally restricted to amounts less than £25,000 if you need borrow more money then the best option will be a secured loan. Home Loans and Mortgages - The Selection Can Be Bewildering For years, when someone wanted to purchase or refinance a home, the choices were simple. The buyer chose either a 15-year fixed-rate mortgage or a 30 year fixed-rate mortgage.
|
|
|
 |
 |
