PMI does represent an expense, but it shouldn’t
deter you from investing in home ownership.
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Mortgage PMI: Making Sense of PMI Options
If you purchase a home and use less than a 20% down payment your lender will require you to have some form of private mortgage insurance (PMI). This insurance protects the lender should you default on your mortgage. While it does represent an added expense, it shouldn’t deter you from investing in home ownership. Below are simple explanations of your options and ways to minimize your PMI costs.

There are two basic kinds of PMI. Regular PMI is mortgage insurance provided by a third party company and is paid as a fee every month until your equity exceed 20%. LPMI is Lender Paid Private Mortgage Insurance that comes in the form of a slightly higher loan interest rate. So, both kinds will cost you money every month but that expense is different over time. Having a realistic estimate of how long you’ll own the home you’re buying is very helpful in determining which one is a better deal for you.

PMI Versus LPMI Example

If you own your home for 4 years the LPMI option will you cost $3,582.72 less and you your monthly payment will be smaller. Alternately, if you live in your house longer than 7 years + 10 months the regular PMI option will begin to save you money.

Admittedly, it can be difficult to estimate how long you may live in a house, but that info will influence what type of Private Mortgage Insurance is a better option.

Patrick Furlong founded EHLA in 2011 despite the challenging economic times. ELA use a more direct approach to providing better value, options and service for customers.


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