Mortgage Rate News

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One of the more common occurrences related to mortgages is the need for Primary Mortgage Insurance (PMI). This is important to mortgage lenders who are concerned when you have less than 20% down. Some use a piggy-back mortgage to help avoid PMI, taking out a loan for 20% of the purchase price. While this piggy-back method can help you avoid paying Primary Mortgage Insurance, the higher interest rate charged on the piggy-back loan can sometimes negate the value, since the piggy-back loan is often for 3o years. (You can get rid of this loan by refinancing, paying it off early, or getting a shorter term on the piggy-back mortgage.) Before deciding that this is the way to go, it is best to run a few numbers and see whether getting a piggy-back loan would really result in a savings overall.

Here is what Investopedia has to say about PMI:

The PMI payment is usually paid monthly as part of the overall mortgage payment to the lender. Over several years of paying on the loan and once the borrower has paid enough towards the principal amount of the loan (to cover the 20%), they can contact their lender and ask that the PMI payment be removed. Many borrowers either forget or do not know that PMI can be removed once the accepted level is achieved.

It is a good idea to see where you stand every so often. While you may have to wait for an appreciation in home value to help you in your efforts, this is one way you can speed up the process. In the end, you should keep an eye on things, though, and make sure that the PMI payments are properly removed when you have enough equity in your home. The different can mean thousands of dollars saved over the life of your loan.