October 6, 2022 | Sexton Real Estate Group
Homeowners insurance is vital to have, but it can be pricey—especially if you have to pay for private mortgage insurance (PMI). PMI is a type of insurance that helps protect your lender if you can’t pay back your mortgage. It’s typically required if you have a conventional loan and put down less than 20% as a down payment. If you’re looking for ways to save on PMI in 2022, here are five quick tips.
1. Get Quotes From Multiple Lenders.
When shopping for a mortgage, it’s important to compare rates and fees from multiple lenders to make sure you’re getting the best deal possible. When you compare quotes, also ask each lender about their policies on Private Mortgage Insurance. Some lenders may require it while others may not. Comparing quotes will help you find the best deal on both your mortgage and your PMI.
For example, if Lender A offers you a rate of 4% with no PMI, but Lender B offers you a rate of 3.5% with PMI, you’ll want to calculate which option is a better deal for you. In this case, Lender B is probably the better choice, even though you’ll have to pay for PMI. This is because the interest you save by getting a lower rate will probably be greater than the cost of PMI.
Of course, every situation is different, so it’s important to shop around and compare multiple offers before making a decision. But by doing your homework, you can be confident that you’re getting the best possible deal on your mortgage.
2. Make A Larger Down Payment.
Most people know that one of the key ways to save money when buying a home is to make a large down payment. What many people don’t realize, however, is that making a larger down payment can also help you avoid paying private mortgage insurance (PMI). Typically, you’ll need to put down at least 20% of the home’s purchase price to avoid PMI. But even if you do have to pay for PMI, making a larger down payment can still help you save money in the long run by reducing the size of your monthly mortgage payments.
3. Look For Lender-Paid Mortgage Insurance.
Lender-paid mortgage insurance (LPMI) is a great way to avoid paying for PMI yourself. With LPMI, the lender pays the cost of the insurance policy upfront, and the premium is rolled into your loan amount. This means that you’ll have a higher interest rate on your loan but won’t have to pay for PMI separately each month. LPMI is a great option for borrowers who don’t want to pay for PMI themselves, and it’s also a good choice for borrowers who are worried about their credit scores. LPMI is a great way to avoid paying for PMI, and it’s also a good choice for borrowers who are worried about their credit scores.
4. Get Rid Of PMI Early.
If you have a conventional loan and pay PMI, you can usually cancel it once you reach 20% equity in your home. To do this, you’ll need to request a cancellation from your lender in writing and provide proof that you’ve reached 20% equity. You can typically reach 20% equity by making extra payments on your mortgage or by waiting for your home to appreciate. Once you reach 20% equity, you can cancel your PMI and save money each month.
5. Don’t Forget About Tax Deductions.
Another way to save money on PMI is to take advantage of tax deductions. The premium you pay for PMI is tax-deductible, so be sure to keep track of your payments each year. You can deduct the entire cost of your PMI premium if you itemize your deductions, or you can claim a deduction for a portion of the cost if you take the standard deduction. Either way, you can save money on your taxes by deducting the cost of your PMI premium.
These are just a few quick tips to help you save money on PMI in 2022. By shopping around, making a larger down payment, and taking advantage of tax deductions, you can be sure that you’re getting the best possible deal on your mortgage. And by following these tips, you can avoid paying PMI altogether. So if you’re planning on buying a home shortly, be sure to keep these tips in mind. They could save you thousands of dollars over the life of your loan.
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