Archive for July 2011
How to Stop Paying PMI on a Home Loan
Borrowers who are unable to pay 20% of the purchase price of their homes are required by law to buy private mortgage insurance policies. These policies will protect lenders from defaulting borrowers. It is temporary, since it stops once you have paid 20% of the purchase price.
You can stop paying PMI on a home loan by getting yourself 20% deposit. You can do this by taking a second mortgage on the property, borrowing from friends and relatives, taking some money from your retirement funds and so forth. This way, you will save yourself a lot more in the future. Those who do not have this privilege will have to pay PMI but have a right to ask for the cancellation of the PMI on their monthly payments as soon as they have 20% equity on their homes. You will know this by calculating the LTV of your home. The home value ratio is the total value of the remaining amount of loan divided by the value of the home. You will have to make an appraisal of the home for this, in case the value of the home has increased over time.
If you do not have the time for keeping up with ratios and calling up your lender, ask him for the amortization schedule, and ensure that you know the date when you will have gained 20% of the value of the home. If you suspect the value of your home has increased, you can schedule an appointment with your lender earlier for a discussion of when the PMI should be dropped. To make it easier for your lender to listen to what you have to say, ensure that you have paid off your debts to him in time every month. When you have been a defaulter for a long time, it will be harder to ask for anything since you will be considered a high risk borrower. Call your lender to schedule an appointment or write a letter and support anything you claim with evidence (appraisal, amortization schedule etc)
It does not take your request for the lender to cease charging you the PMI as it is a requirement of law for them to cease charging PMI as soon as you have 20% equity on your home. However, you may have a hard time requesting for your right if you have not been good at making your payments. Sometimes, borrowers will have to pay their PMI for longer because they have been defaulting.
Incoming search terms:
- paying home loan
Mortgage Insurance Types and Their Benefits
The most basic of mortgage insurance is private mortgage insurance, which is paid for by most people who cannot afford to foot 20% of the value of their homes as down payment. This has been designed to protect lenders who have to lend home loans to people who are not able to pay for it in time. It protects them from defaulters and people who have bad credit records. The insurance company will cover the banks in the event that people default in the payment of their money.
Mortgage protection insurance is another basic insurance policy, whose main function is to cover the bank in the event that you are not able to repay the loan. It is divided into three and you have the choice between the life, disability or the unemployment insurance policy. The latter is the most popular in the recession because many people are out of jobs and need some cover to prevent themselves from defaulting. In the event of a default, it is the responsibility of the insurance company to repay the bank.
Mortgage life insurance is available in two forms; level term insurance and decreasing term insurance. Level term insurance charges the same rate of premium from start to finish while decreasing term insurance decreases at the same rate as the decreasing principal. In other words, the cover you will have will be the same as the amount of money you still have to pay to the bank. Mortgage disability insurances have waiting periods that vary from 30 days to 90 days. Those who opt for reimbursement after 30 days will have to pay higher premiums than those who opt for 90 days waiting period. As for mortgage unemployment policy, you have the choice between covering the whole of it or some of the mortgage payments you will be paying the bank. Some policies will only be active when you have been involuntarily laid off from work so you have to read the terms and conditions carefully. Any policy that gives you luxurious coverage will mean that you will have to pay a lot of premium.
With private mortgage insurance the insurance company will pay the bank in the event that you are unable to pay the fees until such a time as the 20% is not needed. This is when the value of the home you will be buying will have reached the 20% equity or the LTV on your home will be less than 80%.
Incoming search terms:
- Mortgage Reducing Term Assurance