What Is PMI and Why Should You Avoid It?
Private Mortgage Insurance (PMI) is an extra cost that homebuyers with less than 20% down on a home are required to pay. PMI helps protect the lender in case you default on the loan. While it might seem like a necessary evil for buyers without the funds for a large down payment, paying PMI can add hundreds of dollars to your monthly mortgage payment. Wouldn't you rather keep that money in your pocket? Here's how you can avoid PMI and save money in the long run.
How to Avoid PMI on Your Mortgage
- Make a Larger Down Payment: The easiest way to avoid PMI is by putting down at least 20% of the home’s purchase price. If you can manage it, this will eliminate the need for PMI altogether.
- Look for Lender-Paid PMI: Some lenders offer lender-paid PMI, where the lender pays the PMI premium in exchange for a slightly higher interest rate on your mortgage. While this doesn’t reduce your monthly mortgage payment directly, it can help you avoid paying PMI separately.
- Explore a Piggyback Loan: A piggyback loan involves taking out two loans simultaneously—one for 80% of the home's value and another for 10-15%. This allows you to avoid PMI by financing the remaining portion of the home’s cost through a second loan.
- Get a VA Loan or USDA Loan: If you qualify for a VA loan (for veterans) or a USDA loan (for rural homebuyers), these loans typically don’t require PMI, even with a low down payment. These loans are great options if you're eligible and want to keep your costs down.
How Life Planner Can Help You Manage Your Mortgage
Whether you're planning to make a large down payment or considering a piggyback loan, it’s important to have a clear understanding of your finances. The Life Planner app offers excellent tools for managing your mortgage, budgeting for home-related expenses, and tracking savings for a future down payment. With its Expense Tracker, Loan Tracking and Amortization features, and Financial Reports, Life Planner gives you the tools you need to make informed decisions and avoid unnecessary costs like PMI.
Make a Smart Financial Move Today
Avoiding PMI on your mortgage is a smart financial move that can save you money over time. Whether you opt for a larger down payment, a piggyback loan, or find a way to qualify for a VA or USDA loan, the goal is to avoid the extra monthly expense. Stay on top of your mortgage and personal finances with the help of the Life Planner app, which will guide you through every step, from budgeting for a larger down payment to managing your loan payments.
Ready to take control of your mortgage and your finances? Download the Life Planner app today! It’s the perfect tool to track your loans, set savings goals, and stay organized as you work toward homeownership. The app’s easy-to-use features allow you to make smarter financial choices, now and in the future.
How to Download Life Planner
Getting started with Life Planner is simple! Follow these steps to download the app:
- For Android users, download the app from Google Play.
- For iOS users, download the app from the App Store.
Don’t wait! Download the app today to start managing your mortgage, avoiding PMI, and building a stronger financial future.