Mortgage Insurance why do I have to pay?
The biggest hurdle many buyers face today when it comes to owning a home is the down payment. How much do I have to put down and can I really afford this. Luckily there are FHA loans that don’t require an astronomical down payment in order to get your home; but there is always a catch and giving a smaller down payment one that is 3.5% of the purchase price simply means you will have to pay for a mortgage insurance premium MIP which is basically insurance offered through the government.
Mortgage Insurance is required for home loans when a 20% down payment has not been given. This is bought by and paid for by the homeowner but offers no coverage to the borrower. In essences mortgage insurance protects the investor of any losses that may be incurred in the event that the borrower defaults on the terms and conditions of the loan.
What is Private Mortgage Insurance PMI?
Private Mortgage Insurance is the same as mortgage insurance the only differences is it is used when obtaining a conventional loan and is obtained through a private sector not the government. Basically offers the lender security in the event that the homeowner where to default on the mortgage payments.
Can I cancel mortgage insurance?
Unfortunately with mortgage insurance MIP it is usually for the duration of the loan and does not depend on how much of your principal you pay down. However with a private mortgage insurance once you’ve accumulated a certain amount of equity on your home typically 20% you maybe able to request a cancellation of the mortgage insurance. This is based on the Loan to value ratio (LTV) simply put it is the amount of money you borrowed divided by the value of the property. For example say you purchased a your home for $100,000 and so far you’ve paid off $20,000 to the principal at that point you may be able to cancel the policy.
How much is Private Mortgage Insurance?
Fees for PMI vary depending on the size of the down payment you put on the house and your credit score; but can range from 0.3% to 1.5% of the total loan amount borrowed.
How can I avoid paying Mortgage Insurance?
By automatically giving a down payment of 20% on your home the lender will not require you to carry mortgage insurance.
To use the PMI Calculator Click Here and get an idea of what your premium may look like.
Looking to buy a home or in the market to sell your home call us today at (954) 303-3032 to speak to one of our experiences agents.