How to Avoid Paying Private Mortgage Insurance. Putting at least a 20 percent down payment on your new home can pay off big down the road.
Not only will you get a better interest rate on your loan, you won't have to buy private mortgage insurance, also known as PMI. Low down payment loans are historically riskier than high down payment loans because people who make small down payments are more likely to default on their homes. That's why lenders like to have PMI on low down payment loans.
But not everyone is able to put 20 percent down and avoid paying PMI.
The premium price depends on the purchase price of the house and the type of mortgage you have. For every $100,000 of your loan you can expect to pay anywhere from $45 to $60 a month.
Once there is 20 percent equity in your home, whether it's because of mortgage payments or home values in your neighborhood increased, you can now discuss cancelling your PMI with your lender. Each lender will have a very different approach on how you should go about it.
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