It is quite advantageous to learn how to avoid Private Mortgage Insurance with the help of 100% Mortgage Financing for potential new homeowners. If you are a new home buyer it is not unusual to find loan officers demanding at least a 5th of your home cost as a deposit. So, if you are someone who is investing say 500,000 of your dollars while buying a home, a $100,000 would go into payment of the deposit. Not many people can claim to have that kind of money to cough up easily. PMI or Private Mortgage insurance comes in handy for folks who have no capacity to shell out the down payment needed.
PMI Mortgage Insurance & Mortgage Lending Companies
In America with the home prices rising significantly an average citizen that doesn’t earn much encounters hardships while trying to own his/her dream home. For most US citizens who find it difficult to own a home of their liking because they cannot arrange for that 20% deposit PMI Mortgage Insurance comes across as a great help. However, one has to bear in mind that Private Mortgage Insurance is a kind of insurance that safeguards the interests of the the Mortgage lending companies, as it makes it possible for them to recover their cash from the defaulting homebuyers.
How to Avoid Paying Private Mortgage Insurance (PMI)
Without going into the PMI definition, lets know what Private mortgage insurance typically does. It puts an extra burden on your pocket by way of increasing the mortgage amount that goes towards the periodic mortgage payments. The way to avoid having to make this payment is the 100% financing method. PMI can surely be avoided employing this method. The second strategy to shed the extra payment load is to be consent to a greater interest charge on the mortgage.
How does 100% Mortgage Financing help Home Buyers
The advantage that the home buyer has with 100% mortgage financing or the 80/20 home loan, is that you are not required to shell out the 20% you otherwise would need towards the down payment. The way you avoid PMI mortgage insurance or are in a position to buy a new home without having to put any money down is going for 2 mortgages instead of just one. Therefore the 100% mortgage financing involves getting a first mortgage home loan for 80% of the cost of your home and a second home equity credit for 20% of the home value. Thus you avoid PMI and fulfill your desire of buying that dream home of yours.