If you're entering the home buying process, the term PMI will
probably pop up on your radar. So what is PMI, and what does it
have to do with your bottom line?
Private Equity Fund Of Funds Private Mortgage Insurance, or PMI, is required on most
mortgages with a loan-to-value ratio of 80% or more. In other
words, if you put less than 20% down when buying a home, you will
probably have to pay PMI.
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Curve Equity Exposed Fund A third-party insurer provides PMI to protect the mortgage
lender. This is a critical point. Many homebuyers think PMI is
designed to somehow protect them, but this is not the case. PMI
protects the lender in case you default on your loan.
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Equity Income Funds The only way PMI benefits a buyer is by helping them qualify for
a loan in the first place. Beyond that, PMI does nothing for the
homebuyer is merely one more thing to pay each month (normally half
a percent of the loan amount).
down mortgages is often private mortgage insurance (PMI). Remember, PMI protects the lender — not the buyer. While homebuyers can request cancellation of the PMI once an 80% value ratio is reached, they are required to pay the premiums until they do so. The cost of PMI is expensive, and the buyer receives no added value from these monthly premiums.
Capital Casebook Equity This is not to say that PMI is all bad. It helps people with bad
credit (or those who can't
afford a 20% down payment) obtain a loan they wouldn't otherwise
be able to obtain. So for some, PMI is the only path to
homeownership. But for others, PMI is more avoidable.
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Private Investment In Public Even if you can't afford a 20% down payment, there are ways to
avoid paying PMI:
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Equity Mutual Funds PMI Sidestep #1
Birmingham Contact Equity You can get an 80-10-10 loan. In this option, you would pay 10%
down and then obtain two loans for the remaining 90%. And because
no single loan accounts for more than 80% of the home's value, you
would avoid having to pay PMI. Interest on the second loan (the
loan for 10%) will be higher, but the two loan payments combined
will still probably be lower than a single loan with PMI on
top.
Private Equity Investment Firm PMI Sidestep #2
Complying Deal Equity Funds Another way to avoid PMI (while putting less than 20% down) is
to pay a higher
interest rate.
Equity Msn Private Wyoming Here's the key to the two approaches above. Mortgage interest is
tax deductible -- PMI is not. In the options above,you could
conceivably pay less each month and have more to write off at tax
time. With the PMI option, you might end up paying more each month
with less of a write-off.
American Equity Investment Bottom line: PMI can help some people qualify for a loan
who might not qualify otherwise. But in most cases, PMI is best
avoided if at all possible -- or discontinued as soon as you reach
the 20% equity mark (80% loan-to-value or lower).
Equity Index Funds * Copyright 2006, Brandon Cornett. You may republish this
article in its entirety, provided you leave the byline, author's
note and website hyperlink intact.
Equity Private Team Wyoming About the Author
Equity Group Investment Brandon Cornett is the editor of HomeBuyingInstitute.com, one of
the Internet's largest and most respected libraries of
home
buying information -- more than 100 expert articles in 12
different home buying categories! Put this knowledge to use by
visiting http://www.HomeBuyingInstitute.com.
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