PMI Changes In 2013 – What Changes Are Happening And Is It That Scary?
There’s been a lot of “noise” talking about the changes to PMI (MIP) in 2013. However, it’s not all scary stuff like your lender might be telling you. We thought we’d break it down for you. Before we do though, let’s go over PMI Changes(or MIP) so you know what it is. Here’s the cliff notes:
- PMI or MIP stands for Private Mortgage Insurance or Mortgage Insurance Premium. The terms are not equal, but they will, unfortunately, be used interchangeably.
- PMI allows home owners to purchase with less money down. The insurance premium they pay as part of the loan is what makes the investment from bank more secure. Therefore, PMI is a good thing from that perspective.
- PMI is not required on all loans – that’s right your loan officer can sometimes structure your loan with low down payment but still keep you from paying any MIP.
So the rate increased back in April. The rate when up a whopping .1% overall. Of course, with six digit numbers any % is too much. But the newest change is what is scaring a lot of home buyers. Starting in June, your loan will have PMI, for LIFE! What does that mean? It simply means that this new PMI change in 2013 is that you will have PMI for the life of the loan. Meaning you could refinance the home and get rid of the PMI if that makes sense after you’ve gotten 20% equity in the home.
The average life of the loan is 5 years and it happened so rarely that I’m sure they figured no one would notice.
How Can I Avoid Paying PMI?
Bring in a 20% down payment (it can be a gift from a family member)Four ways to avoid paying private mortgage insurance:
- Obtain a second mortgage or a “Piggyback” loan (yes, they still exist).
- Have your lender pay the PMI with a lender rebate or credit to avoid monthly payments.
- Have the seller pay the PMI.
For the best information please contact a good loan officer, and we’re happy to recommend one to you, simply Contact Us!
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