Private Mortgage Insurance

Private Mortgage Insurance - a recurring, monthly, unwelcome guest. It
sounds similar to and is about as welcomed as a similar acronym. PMI is
private mortgage insurance. This insurance policy is paid for by the
homebuyer when the amount of their primary mortgage is greater than 80%
of the value of the property.You will note that the term
"primary mortgage" was used. It is not the total of all mortgages and
home loans on the property that is evaluated, but rather the amount of
the primary or largest mortgage on the property that can trigger
Private Mortgage Insurance.Private Mortgage Insurance is
calculated by taking 0.5% of your primary loan balance and dividing it
by 12 . For example, if your primary mortgage is $200,000 and you are
required to pay Private Mortgage Insurance, your mortgage payments
would be an additional $83.34 per month. For most homebuyers, this
additional premium is a considerable financial burden to undertake.There
are ways around Private Mortgage Insurance for those homebuyers unable
to put down 20% or more on their new home. Mortgage lenders have
created loan packages which include two or more home loans that when
combined exceed the 80% threshold, while no one of the loans exceed
that threshold.Typically there is a primary mortgage and either
one or two home equity loans taken out simultaneously which are 81% -
100% of the home value. This affords the homebuyer to put less than 20%
down, or perhaps put nothing down at all while at the same time
eliminating the need to pay Private Mortgage Insurance.When you
review this type of package you will note that there will invariably be
a different interest rate on the mortgage than there is on the home
equity loans. The mortgage rate may have a slightly lower interest rate
or perhaps even a considerably lower interest rate.You should
be able to calculate what the monthly payments would be for the
combined loans and then determine if it comes out less than a single
mortgage with Private Mortgage Insurance. A good lender is only going
to present you the package if the payments are cheaper than a single
loan with Private Mortgage Insurance.You are able to refinance
the loans at any point and combine them into one payment. You would
only do this when the value of the home is more than 20% above of the
amount you will mortgage. As the value of your home increases through
home improvements o, you can receive an appraisal and speak to your
home loan professional to determine if refinancing the loans into one
loan makes sense.These types of loans are often referred to as
80-10-10 loans or 80-15 loans. An 80-10-10 loan is a mortgage at 80% of
the amount to be financed and than two home equity loans at 10% each.
You will likely find that all three loans will have a different
interest rate with this type of package. 80-15 loans are similar but
would be the main loan at 80% and a secondary loan at 15% with the
buyer putting down the additional 5%.It is important to note
that when financing 90% - 100% of a home, the appraisal will play a key
role in the loan approval process. If the appraisal does not come out
at a pre-determined amount.You may need to go back and
renegotiate the purchase price of the home or run the risk of being
denied the mortgage. Most real estate contracts, do have a clause in
them that allows the buyer out of the contract if they are denied a
mortgage.You will want to speak to the lawyers and real estate agent in
advance if you are planning for applying for this type of loan.