Kathy O'Brien Realty - Lake Champlain & Vermont

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Money Down the Drain

Money Down the Drain

Imagine your money down the drain...private mortgage insurance is necessary for buyers who don't have, or choose not to put 20% or more down when they purchase a home. If this is you, take heed.

It is required for high loan-to-value mortgages. It also provides an opportunity for many people to get into a home who would otherwise not be able.

But, avoid money down the drain!  Eliminate the expense as soon as possible - you'll lower your monthly payment!
 

FHA loans made after 6/1/13 that have 90% or higher loan-to-value at time of purchase have a mortgage insurance premium (MIP) for the life of the loan. FHA loans made prior to 6/1/13, can have the MIP removed after five years, if the unpaid balance is 78% or less than the original loan-to-value.

VA loans do not require mortgage insurance. Conventional loans, in most cases, with higher than 80% loan-to-value require mortgage insurance. 

The cost of that insurance varies but with a $250,000 mortgage, it could easily be between $100 and $200 a month!

Your monthly mortgage statement should itemize what your monthly fee is for the mortgage insurance. Unlike interest that is deductible, most homeowners are not able to deduct mortgage insurance premiums.

If you plan to remain in the home or to stay there for a considerable number of years, the solution may be to refinance the home. If the home has increased since it was purchased, the loan-to-value at its new appraised value may not require PMI. Who knows...you might even be fortunate enough to obtain a lower rate than you currently have.

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