A client recently told me that she absolutely hates PMI or MI and will avoid it at all cost even if it means she has to wait to purchase a home. Here’s my thought, before you write off mortgage insurance, let’s look at how it may provide valuable opportunities and options to you as a homebuyer.
- Increased buying power. Say you’ve saved $20,000. You can use that cash to put 20% down on a $100,000 home OR you could make a smaller down payment on a more expensive home (bigger and nicer) — for example, 10% down on a $200,000 home.
- Expanded cash-flow options. Using MI to finance your mortgage, you can elect to put less money down and still have funds for home-related purchases and repairs or investments. For example, rather than putting 20% down ($40,000) on a $200,000 home, you could put down 10% ($20,000) and use the other $20,000 to remodel.
- Lower monthly payments. If you have good credit, you may be eligible for lower borrower paid MI rates (Conventional).
- Predictable monthly payments. A fixed-rate mortgage with MI provides you with a locked-in monthly payment that will not increase and that will be reduced when MI coverage is cancelled (Conventional).
- Mortgage insurance may be cancelled. On Conventional loans with MI, coverage must automatically be cancelled by the lender when the loan reaches 78% of original value through amortization. MI also may be cancelled when extra payments bring the loan below 80% of original value (Conventional loans).
- MI is tax deductible- Every year Congress decides whether PMI is tax deductible- For the past few years, it has been! It’s a great write off!
If you are looking to sell or purchase a home in the Dallas area, feel free to reach out to me. As an experienced real estate agent, I will sit down with you and discuss your real estate needs. Together we will work as a team to reach your real estate goal!