Category: mortgage

In these times of economic crisis, a lot of people scramble to save their homes. The task of saving ones home is not easy but there are ways to do away with some extra payments such as private mortgage insurance premiums. If you are one of those people who did not pay at least 20 percent down payment when you bought your home and were forced to get private mortgage insurance, don’t worry. You do not have to pay for private mortgage insurance protection premiums for life. Yes, you are allowed to cancel your private mortgage insurance coverage when you fulfill certain conditions. To help you get rid of your private mortgage insurance premiums, here are some tips for you.

Get Over The 20% Ownership Threshold

The best way to get away from paying private insurance premiums is to raise your equity on your home above the 20 percent level. Raising your equity over the property beyond the 20 percent threshold is very important. Once your equity on your home exceeds 20 percent, you are no longer required to maintain private mortgage insurance coverage.

There are three ways to raise your equity on your property. First, you can increase your down payment to exceed 20 percent. For instance, if the property that you want to buy is worth $200,000, you need to pay $40,000 which is equivalent to 20 percent of the total price is order to avoid paying private mortgage insurance premiums. Second, pay your monthly amortization religiously for several months and when you hit more than 20 percent ownership, you may cancel your private mortgage insurance coverage. This means that if your home is worth $200,000 and you have already paid about $50,000 which is roughly 25 percent of the value of your property, you may now cancel your private mortgage insurance coverage.

Third, you can have the value of your property reassessed to increase your equity. In other words, if the value of your property has increased over time, you may be able to cancel your private mortgage insurance coverage. Real property tends to appreciate with time so there is a big possibility that the home that you bought for only $200,000 dollars four or five years ago will now be worth about 20-30% of its original price. Improvements on your property can also push up the price of your home. To get some ideas as to how much is the current value of your property, get a new appraisal of your property.

Are you planning to buy a home? If you are planning to buy a home and you do not have enough money to cover the required 20% down payment, do not despair. With the help of mortgage insurance coverage, you can still buy your dream home even if you do not have enough money to cover the 20% down payment. Despite the financial crisis, there are still companies out there that are willing to finance the acquisition of your new home even if you only have enough money to cover about 10% of the needed down payment. All you need to do is get insurance coverage to cover for whatever losses the financial institution may sustain in case you default on your mortgage.

However, before you jump into the chance of buying a new home for just a little amount of money as down payment, there are a few important things that you need to know about mortgage insurance. To give some ideas of what you are getting yourself into when you get mortgage insurance coverage, here is some basic information about mortgage insurance for you.

Cost Of Mortgage Insurance

The cost of mortgage insurance may vary depending on several factors. Insurance companies usually look into the amount of the loan that you want and your capacity to pay the mortgage when they make assessment on your insurance policy premiums. They also consider your credits scores. If you happen to be one of those people who have very good credits scores, you may be able to get lower private mortgage insurance premiums. On the other hand, if your credit history is less than impressive, your insurance premiums may be a bit high. However, the good news is that mortgage insurance premiums seldom go higher than one to one and a half percent on the total cost of the property that you want to buy. This means that if the property that you want to buy is worth $300,000, you may have to pay a total insurance premium of about one to one and one half percent of that amount. Don’t worry; this amount will be spread over the term of your mortgage so you do not have to pay the whole amount of the mortgage insurance cost up front.

Mortgage Insurance Premium Is Not Tax Deductible

It is a bit unfortunate but the government still does not allow mortgage insurance premiums to be deducted from your income tax returns. Mortgage Insurance premiums are considered as your direct expense and cannot be passed on to the government as tax exemption.