Private mortgage insurance PMI is usually required when a prospective home buyer doesn't have a large enough down payment typically less than 20 percent to put down on a home. These premiums can cost anywhere from one hundred to a few hundred dollars per month. However, there is a way to save money on your private mortgage insurance, so keep reading to learn how.
Cancel your private mortgage insurance - PMI
Most PMI can be canceled once you've put enough equity into your home to equal 20 percent of the loan amount, or the home has appreciated enough in value to bring up the value of your initial investment.
This cancellation won't happen automatically though; you need to actually call up your bank and get the ball rolling. To cancel your PMI, you'll need to prove the current market value of your home and that you've paid at least 20 percent of the equity initially borrowed to purchase the home.
To do this, have all your mortgage payments filed away and bring a summary of recent property listings from your area that show the current market value for a standard home similar to yours.
Government Loan Alternatives - FHA
The Federal Housing Administration FHA offers what's called an FHA Home Loan. These aren't actual loans, but rather they provide insurance for home buyers who have low down payments, as low as 3 percent of the home's market value.
Instead of you having to pay for private mortgage insurance, the FHA Home Loan program insures the loan, meaning you can save on your insurance and even secure a better interest rate. Not all lenders participate in the FHA program, so look for one in your area. Also, FHA home loans are subject to caps that differ depending on your county or region.
Use Veteran Status to Get Your VA Loan
Through the Department of Veterans Affairs home buying program, you may be eligible for mortgage insurance coverage through the VA. There are limits though on the price of the home, and this will fluctuate depending on your region or county.
Talk to a Mortgage Broker
Before you opt for your bank or lending institution's standard PMI, ask if you can obtain your own private mortgage insurance. You can sometimes find lower rates from a private insurer rather than going directly through your bank.
About the Author
Article by by Jason B. Cox. For information on practical money saving tips, please visit MoneySavingTips.com, a popular site providing great insights concerning savings ideas, such as student debt help, prepaid credit cards for teenagers, and many more!
