How To Avoid Paying Private Mortgage Insurance When Buying A Home
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Loading... - Eric Robert
- 10 Mar 2023
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Are you planning on purchasing your first home this year? Have you heard your friends, family, and possibly your REALTOR® mentioning private mortgage insurance?
When you use a mortgage to buy a home, if you have less than 20% down, the lender will require you to pay private mortgage insurance (PMI). PMI protects the lender against the risk of the borrower defaulting and entering foreclosure.
The lender will likely need the insurance purchased from a PMI company before they approve the loan.
The cost of this insurance will be added to your monthly mortgage payments, and while this can make a significant difference to monthly expenses, it does allow borrowers without a large down payment to buy a home.
How to Avoid PMI
To keep your outgoings to a minimum, finding out how to avoid paying PMI will reduce the overall cost of your mortgage.
One of the simplest ways to avoid PMI is to have a down payment of 20%. This means the loan-to-value ratio will be 80% or less, meaning finding a down payment of $40,000 on a $200,000 home.
A down payment of this size will be out of the reach of many homebuyers, but there are other things you can do to avoid PMI. Read More…
