Kim Daneault
KELLER WILLIAMS REALTY / Metropolitan | 603-345-7783 | [email protected]


Posted by Kim Daneault on 9/6/2020

Image by StartupStockPhotos from Pixabay

In general, if you have less than 20 percent of a down payment for the house you want, you will have to pay private mortgage insurance (PMI). This insurance is a cost to you to protect the lender if you default on the loan. In most cases, it’s better to save the 20 percent down payment, but if you absolutely cannot do that and rent is costing you more than a mortgage payment even with PMI tacked on, then it’s better to buy and pay PMI. Another reason to pay PMI is if you have the 20 percent down payment, but you are buying a house that needs some work — you can make a lower down payment and pay PMI so you have more cash for repairs.

Avoiding PMI

You can avoid paying private mortgage insurance in three ways:

Make a down payment of 20 percent or more of the purchase price;

Get a loan backed by the VA or the Department of Agriculture; or

Get a loan that has PMI, but make sure you can cancel it as soon as you get 20 percent in equity built up.

The easiest way to get the 20 percent down is to put money in a savings account that pays high interest. Put what you have for a down payment in the account, then add money to it every month. Some people find it easier to put $50 per week, while others might want to put a lump sum in the account once every month.

With the VA and Department of Agriculture loans, you have to qualify for these loans. Sometimes your only option might be to get the loan with PMI, but make sure you can stop paying PMI once you have 20 percent in equity. Making extra payments on the principle is one way to get equity to build up faster.

Types of PMI

Your lender has five types of PMI to offer you. The most common is borrower-paid mortgage insurance. This is usually a monthly fee that is combined with your mortgage payment. You need to get 22 percent equity before your lender drops BPMI. You also have to be current on your mortgage payments. Some lenders will cancel the BPMI at 20 percent equity if you ask.

Single-payment mortgage insurance is PMI that you pay in one lump sum at closing. In some cases, the lump sum might be divided into equal payments and paid with your mortgage for the year. If you pay this mortgage insurance up front, your monthly payments are lower. However, if you sell your house or refinance it, you won’t get any part of your premium back.

Lender-paid mortgage insurance means that your lender pays for the PMI. However, your interest rates are higher to make up for those payments, so technically, you are still coming out of pocket for it. Because this type of PMI is built into the loan, you can’t cancel it when you have enough equity. And, your interest rate won’t go down, either. The one benefit of lender-paid mortgage PMI is that even with a slightly higher interest rate, your payments are most likely going to be lower.

The fourth type of PMI is split-premium mortgage insurance. This is a combination of buyer-paid mortgage insurance and single-payment mortgage insurance. You pay this insurance in two parts: One part in a lump sum at closing, then the balance is worked into your mortgage payments. You don’t need a huge lump sum at closing and your mortgage payments will be lower than if you were to have BPMI.

Finally, Federal Home Loan Mortgage Protection, or MIP, that is mortgage insurance you can get if the Federal Housing Administration (FHA) underwrites your mortgage. If you have a down payment of 10 percent or less, you will pay MIP in the form or an up-front payment plus extra payments worked into your mortgage.





Posted by Kim Daneault on 11/26/2017

Home insurance is something that every homeowner needs, but not necessarily something that everyone understands. It’s a great idea to have homeowner’s insurance because it protects your home and all of your possessions. Yet, this insurance is in fact a requirement. Mortgage companies require borrowers to have this protection when they buy a home. You’ll need protection for the amount of what is deemed the “fair value” of your home. This fair value is usually based on the price of purchase. Some renters are even required to have insurance for their property. As stated above, this type of protection is a smart idea. 


What A Home Insurance Policy Covers


The terms of home insurance can be very confusing. Most policies will cover damage to the outside of your home. This will include vandalism, fire, lightning, hurricanes, or down trees that may hit the home. The insurance company will estimate the amount of damage and provide you with funds so that the damage can be repaired. In extreme cases, your home may need to be completely rebuilt. Home insurance does not typically cover floods, earthquakes and home maintenance issues. You may need separate policies or extended policies to get these items covered based on where you live. The interior of your home is covered by home insurance as well. This includes clothing, appliances, furniture and electronics if they are destroyed by something that affects your home. 


Off-Premises Coverage


Some home insurance policies have coverage that includes items that belong to you, no matter where you are when something happens. If you lose jewelry on a trip to Europe, for example, you can get a homeowner’s policy that will cover that. This type of coverage does have strict limits, however, so don’t expect your insurance company to give you 100% of the value of your gold necklace that you lost in Paris! This type of coverage is great for items like engagement rings. 


Liability


Your homeowner’s insurance also includes a liability clause. This includes injuries that occur on your property that have been caused by you or your family. This will even include any problems caused by pets in the home. Beware that insurance companies can limit this type of coverage based on the type of dog breed that you own. Insurance companies may even decline to cover you based on the type of dog you own. If a dog bite does occur on your property and you have a breed that works within the insurance company’s limits, you’ll be covered. If anyone is hurt on your property and files a lawsuit, you’re protected.     

 

Rates


Your insurance rates will be determined by many factors including the neighborhood, crime rates and the climate of the area. Before you choose a place to live, you may want to investigate the insurance costs before you settle on a place to buy.





Posted by Kim Daneault on 5/7/2017

Home insurance can be one of the more significant expenses when you’re a homeowner. You may feel that you’ll be stuck in the same monthly premium month after month, but there’s plenty of ways that you can save on your home insurance by making a few cuts here and there. 


Get A Higher Deductible


Just like any kind of insurance, the higher that your deductible is, the lower your premiums. The main problem with this is that when you need to make a smaller claim, the insurance may not cover any of the cost. Compare the risk of paying for expenses out of pocket to the benefits of a lower insurance premium. 


Get An Alarm System


Having an alarm system can help you to save money on your home insurance. The types of alarm systems that are directly connected to police departments or a central monitoring place will save you more money. You’ll need proof of this in order to get a discount. 

Other alarm systems like CO2 detectors and smoke alarms are generally required by law in a home, but check with your insurance company. You could save a little extra for your efforts to protect your family and home. 


Use One Insurance Company For Everything


Most insurance companies offer more than one type of insurance. This means that they love customers who use their policies to cover everything. Bundling your home, auto and life insurance with one company can help to save you some cash.


Own Your Home


Yes, paying your mortgage off completely sounds like a feat. Once the mortgage is paid off, however, you’ll have lower insurance premiums. This is for the simple reason that insurance companies feel that once you own the home, you’ll be more mindful of taking care of it. 


Think Before You Build


Building an addition on a home or putting in a swimming pool may sound like a great idea at first. You’ll need to think of how these construction projects will affect your premiums. A swimming pool raises your liability risk. Wood structures are considered highly flammable and cost more to insure. Many things that you put in your home can drive up the cost of your policy.  


Review Your Policy Often


You always have the right to do some comparison shopping once you get an insurance quote from one company. The place you work for may even offer some sort of group rate for insurance. Associations that you belong to may also be able to help save you some money. Do a little ground work and you may be able to save big just by comparing policies and levels of coverage.                  


Assess Your Valuables


The whole point of insurance is for you to be able to replace your valuables if damaged or stolen. If items in your home have changed, you may want to reassess the contents of your home and just how much coverage you need. If you have less to replace, you’ll save on your insurance premiums because the value of your policy will go down.







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