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Private Mortgage Insurance - How To Avoid This Expense
(presented by www.refinance-refinance.net - mortgage lenders)



By Ben Afzal

Basics There are three basic ways to avoid this expense:

  • Split the loan up
  • 100% loan with no private mortgage insurance
  • Use a rise in equity value

Split The Loan Instead of getting a single 100% loan you can get two different loans. For example, you can have:

  • A first loan that covers 80% of the value of a property
  • A second loan that covers 20% of the value of a property

The combined total covers the 100% value of the property. In breaking both loans up in this way no loan is over 80% of the value of the property and as such neither charges a borrower private mortgage insurance.

The second loan usually has a higher interest rate than the first loan.

This arrangement will also require a borrower to make two different payments. Sometimes these loans end up with two different lenders, which can also add to the hassle of making both payments.

100% Loan With No Private Mortgage Insurance Some mortgage lenders offer a 100% mortgage loan with no mortgage insurance. The risk that the lender incurs with this type of loan is paid by charging a higher interest rate than normal.

Interest payments on mortgages are often tax deductible, but private mortgage insurance may not be. Consult with your tax advisor about this.

Rise In Equity Value You may buy a property with 100% financing and initially have mortgage insurance to pay.

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HOME LOANS ADVERTISEMENT

At the start of your 100% loan the property will have the same value as the loan (for example, the loan is $300,000 on a property valued at $300,000). If your property rises in value over time you may be able to use this rise as leverage to refinance the property.

If your loan is $300,000 and your purchase price is $300,000 you may have the following scenario:

  • Value of property rises to $400,000
  • Refinance at new value with a loan to value ratio of 75% ($300,000 loan on a $400,000 property)
  • Because the loan to value ratio is less than 80% the lender will!
    not cha
    rge the borrower private mortgage insurance

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For additional Mortgage Refinancing information
and resources visit Mortgage Refinancing.
(http://www.refinance-refinance.net)
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This entry was posted on Saturday, October 7th, 2006 at 4:42 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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