For many homebuyers, putting 20 percent down on a home makes little financial sense, yet consumers resist using private mortgage insurance (PMI). Here are a few reasons why PMI is a good move.
PMI protects the lender and you. PMI protects the lender in case you default on your loan, allowing you to borrow hundreds of thousands to buy a home with as little as three percent down for a conventional loan.
Interest rates are low. With rates in the low four percent range, the borrowing costs to buy a home are ridiculously low compared with car loans and other lines of credit.
Using OPM is smart financial planning. Other people’s money is a great way to get into the game. Thanks to PMI, the bank’s insurer takes the risk. Twenty percent down on a $400K home is $80,000. Three percent down would be $12,000, which is a $68,000 difference.
PMI can be removed. You can cancel PMI when your loan balance is paid down to 78 percent of the purchase price, or if your lender appraises the home to show an increase in market value great enough to eliminate PMI.
There are other reasons to love PMI. You’ll likely lose more in equity than it would take to save such a large down payment, at today’s sales pace. And it’s tax deductible.
That said, putting less money down is going to work for you only if you can afford the higher monthly payment, or you can choose a less expensive home. At least you’ll be in the game. Please consult your financial advisor before making any home-buying decisions.
Author:Chris Royer Phone: 720-364-9774 Dated: June 8th 2017 Views: 51 About Chris: ...
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Rockland Miller is the newest member of the Integrity group at Re/max southeast. He is a born and bred Colorado Native, having lived North, South, East and West of Denver he is proud to represent our city.
He has spent the last 14 years in the construction industry, owning his own commercial contracting business. With encouragement from friends and neighbors, Rockland has decided to dedicate his time to helping represent the people of Colorado in their real estate needs. He is a dedicated professional, focused on improving lives by elevating the home selling and purchasing process. Rockland’s knowledge of Colorado’s real estate is unparalleled. He is known for his outstanding client service, 24/7 availability, high tech marketing techniques, personal touches, high energy and top of line integrity. Rockland has extensive construction experience and can provide you with an in-depth understanding when purchasing your forever home or selling your starter home. Let him simplify the process for you.
In his free time, Rockland loves to go camping with his wife Sarah and son Everett. He also loves to spend time outdoors hiking, snowmobiling and going to the lake. He is an active member in his community, participating in events year round.