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Thursday, November 8, 2018

2nd of 10 clever ways to save money on your mortgage!

2. Cut Out the PMI

PMI protects the lender in case of loan default
If you borrow more than 80% of the value of your home, you normally have to pay for private mortgage insurance (PMI) to protect the lender. 

If your loan balance is around $140,000, you could be typically paying $720 and as much as $1,400 for PMI just this yearYou can "buy out" the PMI with an up front premium paid to the PMI company and you don't have a monthly PMI payment associated with your mortgage payment. 

There is another new feature that also allows for partial up front payment and a monthly payment amount.  Each has its benefit and requires analysis to see if it makes sense to do it and if you need help with the analysis, call me at 801-540-5108 and together we can find out which is the best way to go.

Avoid PMI!
A down payment is the most obvious way to avoid paying for PMI. If this amount is more than you have in savings or gift from relatives with the homes you're considering, suggests simply shopping for lower-priced homes for which you can make a down payment. For all the Dave Ramsey fans, he suggests down payment great enough to avoid PMI AND 15 year conventional loan financing as the ONLY way to go!  Whether you go with 30 or 15 year financing, avoiding PMI SAVES thousands of dollars annually!

If you've already bought your home, you can speed up those payments to get the balance below 80%, and then request that the PMI payments be dropped. The process of having your private mortgage insurance dropped EARLY is a process and I can go over the best way to approach this with your loan servicer.  Give me a call at 801-540-5108 and I can go over the best way to be successful getting your PMI dropped EARLY!   Lenders do not always agree to drop the insurance requirement, but at that point you could also refinance to get rid of the PMI.

Check for PMI cancellation at 78% loan to value!

The law says a lender has to drop the PMI at the point when you are scheduled to reach a balance of 78% of the home’s value at the time of purchase, as long as you're making the payments on time. If you are at that point, check to make sure the PMI has been dropped. 

Highlighting the balance you need to pay down to on the amortization schedule that you receive at closing from you lender is one of the best ways to REMEMBER when to check to make sure that your PMI is no longer part of your payment. 

Marty Qualls
Professional Loan Services since 1991
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