“FIVE STAR TIPS”
FACT: When purchasing a house with less than 20% down you are required to pay for Private Mortgage Insurance (PMI) to protect the lender (not you), in case you default on your loan.
PMI can cost you thousands of dollars! On a $100,000 loan with 10 percent down ($10,000), PMI might cost you as much as $40 a month. Since PMI does not go toward reducing your mortgage, eliminate PMI payments if at all possible, and save thousands of dollars over the life of your loan.
Examples of ways to eliminate the PMI:
- Put down 20% when you purchase the property.
- Pay extra toward your principal each month. Building equity faster this way, while your home “appreciates” can help you eliminate the PMI.
- Request that your mortgage company set you up on a bi-weekly payment. This will allow an extra payment to be paid each year toward the mortgage, paying your mortgage off years sooner by retiring your mortgage sooner.
- Educate yourself on different types of loan programs. Even if you’ve already owned a home, you may be eligible for “FIRST TIME HOME OWNER” loans, which might not require PMI.
FACT: The extra money saved, from not paying PMI, can be applied to your principal–building equity, while retiring your mortgage sooner.
Since your goal is to eliminate the PMI from your monthly mortgage payments, be sure to ask that prospective lenders put in writing their specific requirements for early payoff or maximum principal payments.
There are lots of lenders out there wanting to win your business. Have a list prepared to discuss with your lender so you won’t have any surprises at the closing table or worse, years down the road. Once again, ALWAYS get it in writing.