How to Avoid Paying PMI on a Mortgage
Private mortgage insurance, or PMI, is an extra monthly expense added to home loan payments. PMI protects home loan lenders in the event a borrower defaults on the mortgage. PMI payments are not required on every home loan. Instead, this extra insurance only affects high-risk borrowers and those with down payments less than 20 percent. But fortunately, there are ways to avoid paying private mortgage insurance.
Other People Are Reading
Instructions
-
-
1
Save money for a down payment. Plan your home purchase in advance and save at least 20 percent for a down payment. Shop less, skip your annual vacations or sell personal items.
-
2
Borrow money from family. Ask a family member to gift or loan you money for a down payment to avoid PMI. Borrowing money from your retirement account can also provide the necessary funds to avoid PMI.
-
-
3
Consider a piggyback mortgage loan. Get creative and purchase your home with two mortgage loans. For example, acquire a first mortgage for 80 percent of the loan and a second mortgage for the remaining 20 percent. With a five percent down payment, you can opt for an 80 percent first mortgage and a 15 percent second mortgage. Discuss options with a mortgage lender.
-
4
Improve your home's value after moving in. PMI isn't permanent and mortgage lenders eliminate this expense once your home acquires 20 percent equity. Help increase your home's value faster with improvements or renovations such as a new kitchen, bathrooms, floors or a home addition. A home appraisal is necessary to determine the value of your property after improvements.
-
1
