What Is The Benefit of Paying Mortgage Insurance? | Fridays with Fred

By
Real Estate Agent with Fred Sed Realty Group ~ Your Premier Orange County Realtors CA BRE #01423187
http://activerain.com/droplet/4XYW

If you plan on buying a home and will be using a down payment of 3.5% to 5% you will be required to pay Private Mortgage Insurance but the big question many home buyers have is if there is any benefit that comes from paying Private Mortgage Insurance and the answer to this question is no.

Private Mortgage Insurance Benefits the Lender

Private Mortgage Insurance only benefits the lender because it protects them if you defaulted on your mortgage.

Let’s say the thought of paying Private Mortgage Insurance isn’t exciting to you; the good news is that you have another option available in the form of Lender Paid Mortgage Insurance (LPMI).

With LPMI your lender will pay the mortgage insurance on your loan but there is a catch, you will be faced with paying a mortgage interest rate that’s higher than what you might pay with a mortgage loan where you were paying Private Mortgage Insurance.

PMI VS. LPMI

The good news about Private Mortgage Insurance (PMI) is that it can be cancelled once you have built 20% equity in your home, but most mortgage loans have “seasoning requirements” meaning that you have to have the mortgage loan for at least 2 years before you can refinance it, and you will also have to be current with your mortgage loan payments or your lender may not cancel your PMI.

Canceling Private Mortgage Insurance can take time but remember that you can make steady progress towards canceling PMI if you prepay your mortgage by as little as $50 per month.

When it comes to LPMI you can’t cancel it since Lender Paid Mortgage Insurance is built into your mortgage interest rate so the only real way to get a lower payment is to refinance your mortgage loan.

Consider All Mortgage Loan Options

Before making a decision to choose a mortgage loan with Private Mortgage Insurance or Lender Paid Mortgage Insurance it’s best to consider all options available to you by speaking with a lender or mortgage professional.

To learn more about Private Mortgage Insurance, or to view homes for sale in Southern California, contact Fred Sed Realty by calling us at (800) 921-9231 or connect with us online.

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Topic:
Home Buying
Location:
California Orange County Irvine
Groups:
Orange County Real Estate
ORANGE COUNTY, CA REAL ESTATE
Tags:
pmi
private mortgage insurance
fridays with fred

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Rainmaker
1,314,940
Jeremy K. Frost
Keller Williams Realty - Dripping Springs, TX
Associate Broker, CNE, CRS, ePro, PSA

Thank you for sharing this post with us. Best of luck!

Dec 09, 2016 07:00 AM #1
Rainmaker
2,608,306
Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

You always do such a great job on your blogs and videos as well!

Dec 09, 2016 07:13 AM #2
Rainmaker
1,105,728
Bob "RealMan" Timm
Alliance Real Estate - Minot - Minot, ND
Bob Timm, Broker Associate, Alliance Real Estate

Super post Fred Sed you just earned yourself an AR "Follower", me.

Dec 09, 2016 07:30 AM #3
Rainmaker
4,069,438
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
"Franklin MA Homes"

Good morning, Fred Sed the good news about PMI is that it's not forever... and it did allow you to get into a home with less than 20% dp...

Dec 09, 2016 07:46 AM #4
Rainmaker
513,471
Fred Sed
Fred Sed Realty Group ~ Your Premier Orange County Realtors - Irvine, CA
Your Orange County Realtor, Why? Because Fred Sed

Thank you Jeremy K. Frost and Kristin Johnston - REALTOR® !

 

Bob "RealMan" Timm - I appreciate it! Thank you!

 

Barbara - Yes, that's true.

Dec 09, 2016 09:29 AM #5
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Rainmaker
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Fred Sed

Your Orange County Realtor, Why? Because Fred Sed
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