The Inside Secrets of Buying A Home!Best Way to Coach a Buyer is Showing the Biggest Mistakes to Avoid
Sample from Inside eBook
Private Mortgage Insurance… What You Need To Know!
Private Mortgage Insurance (PMI) is required on conventional loans when you purchase a home if your starting equity (down payment) is less than 20% of the amount borrowed. Remember how we said the banks are in the risk-avoidance business?
They require this PMI to protect themselves in case you default on your loan. For every $100,000 borrowed on the home loan, the extra PMI insurance will cost you several hundred dollars more annually. In actuality, you could end up paying hundreds of dollars unnecessarily that quickly add up to thousands of extra dollars out of your pocket over the life of your loan!
See, when you reach 20% in home equity, you can immediately discontinue this insurance payment! The banks don’t care to remind homeowners of this hidden financial trap… because they are making money from you and all the others who aren’t aware of it! And the banks can be pretty sneaky. Many homeowners have the PMI paid right out of their escrow accounts, so they forget all about this payment!
So keep in mind, if initially you are required to pay the Private Mortgage Insurance, keep a close eye on your loan status. When you hit 20% of the present-day value of your home, then you can eliminate paying the extra insurance once and for all!
NOTE: For those of you who consider saving tens of thousands of dollars a good idea… and you set up bi-weekly mortgage payments, you must really keep an eye on the PMI! The bi-weekly plan “accelerates,” or speeds up, the amount hitting the principal much faster!