YOU ASK:

How do I avoid paying private mortgage insurance?

WE ANSWER:

We highly recommend that you get rid of private mortgage insurance as soon as you can, since the premiums just add to your monthly payments, but do not really give you insurance protection in terms of your mortgage.

Here are some ways where you can avoid paying mortgage insurance:

  • Pay 20% or more as down payment of the property. This is based on the purchase price or the appraisal value of the property. That means, it is highly recommended that you buy a house that you can really afford.

    It will also be good to set aside money regularly to save up for the down payment. When you pay the 20% in down payment, you won't be required to get mortgage insurance. However, you should also take into consideration that you will be paying other closing costs. So you should not just save up for the down payment but for the other closing costs as well.

  • If you have additional funds, pay as much as you can towards the principal. That way, you are speeding up the process of getting the 20% equity.
  • Have your property appraised. If there is a marked increase in property values, you may find that you already have 20% equity based on the present value of the property.
  • The PMI may also be automatically canceled if you have been paying for half of the amortization period. However, the account should be current within the period that you have been paying for your mortgage.

When you already are paying private mortgage insurance, you should make sure that your account is current at all times. You should maintain a good payment history, that means you should not be 30 days late in paying for your mortgage for this current year, and not be 60 days late within the last two years. You should also be asked to furnish proof that your property has not decreased in value.

It is important that the present value of the property is not lower than the original value at the time the loan was originated. Another requirement is that there should be no other liens or second mortgage against the house.

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