Chicago Mortgage

The dreaded PMI (Private Mortgage Insurance) is required by lenders to borrowers who do not have at least 20% of the purchase price as a down payment. Depending on your loan balance, this PMI payment can range from an extra $50 to $300 in addition to your mortgage payment. Yikes!

Have you ever heard of "Lender Paid Mortgage Insurance?"

Lender Paid Mortgage Insurance (LPMI) is where the lender doesn't require PMI in exchange for a higher interest rate. Now, who would want to pay for a higher interest rate? Well, if you are concerned about not exceeding a particular monthly payment, you may want to consider this option.

I've laid out two options, so you can compare the difference.

1. Loan Example with PMI

- $200,000 purchase price

- 5% down payment ($10,000)

- 30 year fixed rate of 5.875%

- Payment = $1247.42 ($1123.92 of principal & interest + $123.50 of PMI)

2. Loan Example without PMI

- $200,000 purchase price

- 5% down payment ($10,000)

- 30 year fixed rate of 6.375%

- Payment = $1185.35

Example 2 is $62.07 less every month. That is a savings of $744.84 every year!

So, if you are purchasing a home or refinancing your existing mortgage and you don't have that magical 20%, just tell me..."I want to know how much I can save with LPMI." This is one of many ways to avoid PMI.

To read more about avoiding PMI, go to 5 Ways To Avoid PMI  This blog talks about mortgage advice and credit advice. I have taken my mortgage and credit experience and wrote down advice that others may find useful. Ways to avoid PMI is just one of many things that has been posted.