How to Avoid PMI Mortgage Insurance


This is an additional insurance that is charged on the amount you borrow from a mortgage lender. If you are clever enough, you will not have to make this payment. Every lender wants to ensure that there is security on the amount of money being lent to a borrower, meaning that there is an insurance being charged on every amount of premium being paid to the lender every month. However, not all mortgage loans will attract this insurance rate. There are certain loans that will not attract them. This depends on the value of the house and the rates that the lenders charge. All the same, this insurance rate is charged when the buyers do not pay 20% of the value of the home as down payment. The rates of the PMI will increase the amount of mortgage payments you pay every month and many buyers are paying this amount because of their ignorance. Aside from protecting the lenders from borrowers who would default on their payments, this special kind of insurance is also designed to protect the borrowers since they do not have to pay 20% of the value of the home when they buy it.

One of the ways of avoiding the payments of this insurance every month is to have a private negotiation with your lender. You can talk to them to remove your payments of this insurance every month. The only downside to this is that you will have to pay off the mortgage at higher interest rate than others. This will also increase your monthly payments, just like the PMI but you can be sure that the higher interest rate will be a cheaper alternative. Sometimes, it is not any better and perhaps the rates of your PMI will be better. The chances of this happening are very few.

To avoid the unnecessary payment of a PMI every month, you may just have to pay the 20% value of the home when you buy it. Not many people are able to do this with the cash reserves that they have, so you have to be clever when paying this amount to the lender. If you have already sold a home, you may pay off the 20% with ease. With the proceeds of the sale of a home, you can even pay off more than 20%. However much possible, you should pay off 20% of the value of your home when buying it.

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