How to get rid of mortgage insurance? A home buyer who is unable to put 20% Down Payment can expect to purchase a private mortgage insurance (PMI) per month. According to a publisher of one of financial magazine, PMI needs to avoid and if you have involved into such mortgage insurance, you have to monitor it. Mortgage insurance premiums are included in mortgage payment and they are calculated based on amount of your Down Payment. Type and amount of loan and also the borrowers’ credit scores are also considered. Before 2007, it is easier to cancel or to avoid PMI, but today the rules have been tighter. That’s why the insurance users are harder to avoid now.
Lenders think that they are riskier and want to have good insurance to protect themselves when their borrowers cannot pay back the loans. Several programs are done by the borrowers to reduce the Down Payment requirement; but those are only the expectations. For those that cannot afford to purchase 20% Down Payment and do not want to purchase OMI, there are some alternative you must try.
Using a piggy-back loan is the first recommended one. This loan can help the borrowers to put 10% Down Payment and take two loans altogether in which the first loan is less than or being at 80% of property value. What about the second loan? The second loan is used to cover remaining 10%. The second scenario shows the borrowers may get the interest rate on their second loan that is less than the first loan. But, if the rate increases, this movement may not affect the financial sense.
Payments on piggy-back loan may be lower, but in some cases, PMI and mortgage may be cheaper than piggy-back payments. This makes you, the borrower, to need much more discuss to your lender to see the best one that’s most sense.
Second alternative is by having mortgage without PMI. In most recent, many housing agents in several states offer a new service of mortgage without PMI. It’s very interesting and needs to try, especially for the first-time home buyers who do not have enough Down Payments.
Having one-time upfront payment for mortgage insurance is also recommended to avoid private mortgage insurance payments. This idea seems more popular and has implemented by a lot of people in these days. But, you need lump sum of money to pay at closing and even pay for home loan. For getting perfect financial situation, a home buyer will be assisted by a seller for taking care of his/ her lump sum of money. This idea is effective to remove PMI.
What about the home buyer who have already involved in mortgage with PMI? The easiest solution to get off his/ her PMI payments is by increasing the equity on home or seeing the home/ property increase on its value.
The last alternative is by letting the equity up. This will happen if the property/ home value has not gone up and a home buyer pays larger payments that can bring the home equity value up. If this happens, the lender will waive PMI payments.
Taken from another source, there are several simple solutions to cancel PMI and here are the points:
- By canceling your PMI by using this ideas:
- Start to get a new appraisal
Most of lenders will consider the new appraisal instead of appraised value or original sales price when they decide whether you have met 20% equity. A new appraisal commonly costs from $300 to $500.
- Do pre-pay your loan
- Remodel your home
Home remodeling is the instant way to increase your home value. Then, ask your lender to re-calculate your LTV ratio by using your new home figure.
- Know your rights
You have to know the closing event like how many months or years it will make you to pay out your loan. Mortgage servicer must also give you annual statement that presents whom should call when you need actual information about PMI cancellation.
- Have these requirements:
- PMI cancellation in writing
- Good payment history
- There are no any liens on home, like home equity line of credit, home equity loan, etc
An appraisal that shows your loan balance is not more than 80% of total value of property/ home