Are you considering buying your first home? Here’s everything you need to know about private mortgage insurance, and how it can help you become a homeowner faster.
If you have a family home, one of the most important steps you can take to protect your property and your loved ones, is taking out a mortgage life insurance policy. This is especially important if you are the primary breadwinner of the family because private mortgage insurance will allow your loved ones to:
- Live in a mortgage-free home
- Remain financially secure
- Enjoy peace of mind, knowing they’ll always have a roof over their heads
- Pay off any outstanding debts and use your insurance funds in a responsible manner.
20/20 Mortgage Insurance Takes Care of YOU
At AIME, we understand the importance of a family home, and of protecting your family financially. That’s why we offer affordable, flexible, and customizable mortgage life insurance that always works for you.
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CALGARY MORTGAGE LIFE INSURANCE
Quick Facts About Private Mortgage Insurance
Private mortgage insurance (PMI) is a type of insurance that most borrowers are required to pay if they aren’t making a downpayment of 20% or more. If you are a first time home buyer, then here are some facts about private mortgage insurance you should know:
What is Private Mortgage Insurance?
PMI is an insurance policy that protects a mortgage lender against loss if a borrower defaults on their loan. Who is asked to buy PMI? While this varies, lenders typically require PMI on conventional loans with less than a 20% downpayment.
How Much Does PMI Cost?
The cost of PMI can vary according to many factors, which include your:
- Borrowing amount
- Loan type and term
- Credit score
- Down payment percentage
In general, private mortgage insurance will cost between 0.5% and 1% of your total amount per year. This means, in some cases, your monthly mortgage payment could be hundreds of dollars higher because of PMI.
How Long Do I Have to Pay PMI?
Once you have built up 20% equity in your home, you can ask your lender to cancel your PMI. However, they aren’t legally required to remove it until you have 22% equity, and on average, this could take 5-7 years, as long as you keep up with your mortgage payments.
How Can I Avoid PMI?
The simplest way to avoid PMi is by increasing your down payment to 20%. Some of the best ways to earn some extra cash for your down payment include:
- Getting a second, part-time job.
- Having a yard sale
- Increase your savings by adjusting your household budget
3 EXCELLENT SOURCES OF DOWN PAYMENT MONEY
Getting a second loan: Some home buyers avoid PMI by getting a second loan. However, it’s best to check with a financial advisor before deciding on this strategy. In some situations, PMI is tax deductible, so it’s important to weigh all your options, and the costs and savings of each approach, before deciding which path to take.
Making the Right Decision
Armed with these essential facts, you can decide how and if you want to pay private mortgage insurance before buying your home. Remember: Although paying PMI is more costly, it does allow you to buy a home earlier, and helps you begin to earn equity much faster.
Call Today
If you are a recent homeowner, and you want to purchase mortgage life insurance to protect your family home and your loved ones, contact the AIME team today at 1-844-974-2020 or fill in our online contact form.
