Private Mortgage Insurance ( PMI) is used by Banks and Mortgage Lenders to insure their interest on the loan should the homeowner default. The reason lenders add PMI to the monthly cost of the loan is due to high LTV (loan to value) transactions. Typically any refinance where the LTV is over 80% is going to require PMI. However there are options for those who do not want to pay the monthly costs.
Split the loan into two loans. Typically your first mortgage amount would be below the 80% threshold requiring PMI. Secondly take out a second mortgage or a “piggyback”. The rates on second mortgages can be higher but not have to pay the monthly PMI costs can make it an attractive alternative.
Instead of paying the monthly PMI you are able to pay the cost of the mortgage insurance upfront or include it in the cost of the loan. Most lenders offer this option and it is smart to compare and see if it make sense for you
Use cash on hand to pay down the mortgage below 80%. Not everyone has the required cash on hand but it the loan is close to being below 80% ltv it might be possible.
With the housing market picking up steam and rates still had historic loans it might make sense to take a look at refinancing. Call me with any questions.
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Craig Thibeau
Senior Loan Officer
North East Financial Middletown, CT
Ph 860-334-1354
NMLS 398576 Company NMLS 117273
craig@northeast-mortgage.com
www.northeast-mortgage.com
