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Sunday, September 07, 2008
PMI or Private Mortgage Insurance is normally required when you buy a house with less than 20% down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure. This insurance protection is provided by private mortgage-insurance companies. It enables lenders to accept lower down payments than they would normally accept. In effect, mortgage insurance provides what the equity of a higher down payment would provide to cover a lender's losses in the unfortunate event of foreclosure. Therefore, without mortgage insurance, you might not be able to buy a home without a 20% down payment. Why do homeowners get saddled with private mortgage insurance anyway? This is insurance for the lender that is now necessary because so many people defaulted on their mortgage loans.
In reality, PMI saves everyone money because without the security offered by this insurance, lenders would be far less likely to lend so much money at such low interest rates. After all, no lender likes high risk borrowers and folks who don't have twenty percent to put down seem risky. Plus, PMI is not forever. Once you have your twenty percent in your home you can refinance and PMI will go away, but your low interest rate won't. In most cases, PMI can be dropped after the loan to value ration drops below 80 percent. The Homeowners Protection Act requires PMI to be dropped when the loan-to-value ratio reaches 78 percent of the home's original value AND the loan closed after July 29, 1999. For other loans, find out from your lender what procedure to follow to have PMI removed when your equity reaches 20 percent.
In reality, PMI saves everyone money because without the security offered by this insurance, lenders would be far less likely to lend so much money at such low interest rates. After all, no lender likes high risk borrowers and folks who don't have twenty percent to put down seem risky. Plus, PMI is not forever. Once you have your twenty percent in your home you can refinance and PMI will go away, but your low interest rate won't. In most cases, PMI can be dropped after the loan to value ration drops below 80 percent. The Homeowners Protection Act requires PMI to be dropped when the loan-to-value ratio reaches 78 percent of the home's original value AND the loan closed after July 29, 1999. For other loans, find out from your lender what procedure to follow to have PMI removed when your equity reaches 20 percent.
Why do we need PMI?
Advantages and Disadvantages of PMI?
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How to avoid paying for PMI?
What are the factors determining PMI rate?
Advantages and Disadvantages of PMI?
PMI Online Calculator
How to avoid paying for PMI?
What are the factors determining PMI rate?
How Do I Cancel PMI?
Where to find lower PMI?
Alternative to paying for PMI?
Questions About Homeowners Insurance
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Where to find lower PMI?
Alternative to paying for PMI?
Questions About Homeowners Insurance
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Current Mortgage Rates*
Loan Type National Average |
|
| 30-yr. fixed | 6.38% |
| 30-yr. fixed jumbo | 7.00% |
| 15-yr. fixed | 5.88% |
| 15-yr. fixed jumbo | 6.50% |
| 7/1 ARM | 6.25% |
| 5/1 ARM | 6.00% |
| 3/1 ARM | 5.88% |
| 1-yr. ARM | 6.00% |
| 1-yr. LIBOR ARM | 5.50% |
| 10/1 ARM | 7.88% |
*Mortgage Rates Updated: 09/04/2008