About PMI Mortgages

October 20, 2011 by  Filed under: Loans 

PMI stands for private mortgage insurance. This is a policy that works to protect the lender from defaulters who have borrowed from them. In the event that the borrower cannot pay the lender, the insurance company will have to pay the lender back. It is an insurance policy that has favored borrowers in a way, since they are now able to acquire property without having to foot the 20% they need to avoid PMI. This is a benefit for both parties but mostly protects the lender. Here, you will learn more about PMI mortgages.

PMI is a must if your LTV is more than 80%. In other words, if you have borrowed more than 80% of the value of your house, you will have to pay PMI alongside your monthly mortgage payments. Borrowers do not have to pay PMI when the value drops to less than 80%. When the borrower has paid off more than 20% of the value of the home, he can approach the lender for the removal of PMI value from his monthly payments. That is why it is important to always appraise your home and calculate your LTV. This will monitor your LTV and you can approach your lender with the values for the removal of PMI from your mortgage.

PMI is about 0.5% of the balance of the loan. You can calculate this with ease and divide the value you attain with the number of months of the year to get the total amount you will pay each month. It is a must that the lender will cancel your PMI once you have gained 20% equity. This may or may not happen depending on your payment habits but legally, the lender is not supposed to charge you any PMI if you have gained 22% equity.

You do not have to pay PMI, you can talk to your lender to get rid of PMI but this will mean a compromise of higher interest rates on your side. When you make calculations, you will realize that it is better to increase the rates of repayment than paying the whole loan with PMI rates. This is relative; so ensure that you have made your calculations very well if you want PMI removed. It is going to be of maximum value to you if you ask for this removal at the beginning of the mortgage loan repayment rather than in the middle.

Learn more about mortgage, please visit Linda Clayton’s site: mortgage calculator with insurance and mortgage calculator with taxes

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