Mortgage insurance is a dreaded term for all those people who want to buy their dream house. Most people take home loans, and those of who are unable to put 20% value of the house as down payment while taking the loan, are required to have a mortgage insurance. Also known as Private Mortgage Insurance (PMI), the payments for this insurance is made by the consumer to benefit the lender, so as to ensure that in case the consumer is unable to pay the loan in the long run, they can get their initial amount through the PMI.
This is a profitable proposition for the mortgage market as the mortgage insurance has additional premiums as compared to a normal mortgage deal. The cost of mortgage insurance payments makes the homeownership cost a lot more than without it. The benefit is solely received by the loan giver.
Now, if you want reduce mortgage insurance,(which you would definitely want to reduce) , we give you some suggestions which can help you out.
• First and foremost, try to give a good amount in the down payment. Mortgage insurance is only required if you give less than or 20% of the cost of amount of your home as down payment. If you can give more, do it, for you will be saved from paying the premiums towards mortgage insurance.
• You can get rid of the PMI also by paying the original balance of the loan, below 78% of the total value. Once the 20% of the value of the loan has been paid off, you can ask to remove the PMI.
• Another great way to reduce mortgage insurance is to get your home reappraised. If you bought your home when the market was down or you have upgraded the value of your house , then you can to get your home reappraised. If the value is more than 20%, you are lucky!
• If you have taken a loan with high interest rates and PMI, then you can refinance your loan, which will help reduce the interest rate and even in the elimination of the PMI.
• You can also opt for lender paid mortgage insurance. In this case, your PMI will be waived off on the condition that the interest rates remain high during the life span of the loan. The advantage of this option is that you will get higher tax deductions than what mortgage insurance would have given you.
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