PMI and Down Payments

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Part of buying a home is researching the market and your finances. Most lenders require you to put at least 20 percent down or pay private mortgage insurance (PMI). Since PMI is a cost that does not lower your interest rate or principal, it’s almost always better to save up that hefty down payment. Lenders charge PMI to cover some of their risk if you do not put the 20 percent down to create equity. Conventional loans backed by Fannie Mae and Freddie Mac always require PMI if you do not put 20 percent down.

Avoiding PMI

In some cases, you could avoid PMI by taking out a special loan or a VA loan. VA loans are only available to veterans, but require very little down or even zero down. The VA doesn’t actually give you the loan—it insures your loan against default. Conventional loans not backed by Fannie Mae or Freddie Mac often have higher interest rates. These two programs are also government-insured loans.

Other reasons to avoid paying PMI include:

  • Tax laws change every year. As of 2017, PMI was no longer deductible, which means that you lose that offset.

  • The lender is the only beneficiary. If you should die before your loan is paid off, it will pay only the lender and only for the balance on the home.

  • You pay PMI until the equity on your home reaches 20 percent. If the market was good when you bought the home, but it tanks a couple of years later, you could be stuck paying PMI for many years.

  • Some lenders require you to pay PMI even after the equity in your home reaches 20 percent. If you do have to take PMI, always read the fine print.

  • Finally, PMI is difficult to cancel. You will need to write a letter to your lender to cancel the PMI. Until you hear from the lender, you will be stuck paying those premiums every month.

  • PMI ranges from .5 percent to 1 percent of the amount you borrowed paid out in equal monthly payments every year. Thus, a loan amount of $200,000 could have a $2,000 per year PMI premium, which is about $167 per month added to your mortgage payment until the lender agrees to cancel the premiums.

Saving the Down Payment

In addition to saving for a down payment, you may qualify for some down payment assistance programs such as the first-time home buyer’s program. These programs help you get that 20 percent so that you do not have to pay PMI. If you have a retirement account, you may be able to use money from that account to help with a down payment.

Though it may seem painful to pay such a large chunk of money, it saves you from paying insurance premiums and it lowers the cost of the loan since you don’t pay interest on the down payment and it is applied to the principal.

Open house on 7/5/2020 at 12 CAPE CLUB DRIVE Sharon, MA 02067


Date: 07/05/2020 Time: 11:30 AM to 1:00 PM  
For Directions: feel free to contact me.  
For more information: click here for the full details  

*** New is Better! *** LIVE ON A GOLF COURSE, LIVE THE DREAM! New luxury townhouses surrounded by the grounds of the CAPE CLUB OF SHARON! Begin your day with a cup of coffee on your private deck overlooking the lush fairway dotted with bunkers, ponds, clusters of gorgeous mature trees, streams and gently rolling greens! Enjoy the serenity around you, step outside and…play! On-site top-notch restaurant, an elegant bar, enormous outdoor patios and fantastic golf course-related amenities: tennis courts, swimming pool, kids pool, driving range would keep every member of your family happily busy! Homes offer innovative modern design, open floor plan layouts, second floor lofts, luxury bathrooms, high ceilings, first floor master bedrooms and much more! Reserve your home today and get a one-year family club membership for free! MODEL AVAILABLE!. Call the Listing Agent for a private tour!

Open house on 7/5/2020 at 63 DEERFIELD Rd Sharon, MA 02067


Date: 07/05/2020 Time: 1:30 PM to 2:30 PM  
For Directions: feel free to contact me.  
For more information: click here for the full details  

Beat the crowd! Act now! This contemporary home is nestled in a quiet neighborhood backing EAST ELEMENTARY SCHOOL (National Blue Ribbon School). Large fenced lot with an inground pool. You would enjoy your private backyard surrounded by beautiful forest, the brick patio, and abundance of colorful birds visiting the bird-feeder. Home is in move-in condition, but TLC (wall paper removal, repainting, etc.) would be beneficial to promote faster equity growth. Talk to your contractor about finishing an unfinished walk-out ground level (Approx. 400SF) with a playroom, sauna, 3-d bathroom, etc. Pool has a newer pump/filter, but has not been opened for 2 years. Many recent updates include windows, garage door, boiler, water heater, septic system, etc. ALSO SEE MLS #: 72612881. Call the LISTING AGENT for a private showing.