Tuesday Tip: Understanding Mortgage Insurance

23 03 2010

Has anyone but me noticed a home/moving trend in my Tuesday Tips recently? Bear with me, but this one, while not as exciting, can save us all a lot of money. And who doeesn’t like that!

For us homeowners out there, I don’t know about y’all, but it can be confusing.

PMI (Private Mortgage Insurance) is required to protect the lender against a buyer who might default on a loan when they enter into a mortgage loan with less than 20% down payment. Depending on what part of the country you live in, you might not have been able to put that kind of a down payment down, but in most cases, once you’ve paid the mortgage equal amount into your equity, you can cancel the PMI. (This also works if your house increases in value.)

You’ll probably have to call to make this happen (they won’t do it automatically), but it’s worth freeing yourself of this expense. It can be over a thousand per year savings.

Make sure you know the market value of your home, but if you can cancel this payment, remember it does not protect the buyer whatsoever. This is entirely for the lender.

I don’t know about you, but I’d much rather a little extra in my bank, than unnecessary extra in theirs!

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