Episode 009 1995 - 96 Season

| Attic Insulation | Clogged up Sink | Remodeling | Baking Soda | Foam Insulation | Private Mortgage Insurance | |

To order a Video Tape, call 1-800-TO-BUILD and ask for Episode #009.


Mortgage Moment - Private Mortgage Insurance

Michael Holigan: Today we're going to cover a term that you're going to hear a lot when you're getting a mortgage that you probably never quite understand what it is, and that's PMI, Private Mortgage Insurance. This is not like hazard insurance at all. What it is really, is an insurance that protects the lender in case you ever default on the loan. Now the lender's requirement if you're putting five, ten, 15 percent down, normally if you have 20 to 25 percent down, or 20 to 25 percent equity in your home, the insurance is not required, but less than that, they're going to ask for it. What does it costs? That's set by your local area, but normally it's about half a percent to three-quarters of a percent on the loan amount. And you pay that each month for that insurance to protect the lender. How can we avoid it? Well, put 20 to 25 percent down. But most people can't do that, so there's a couple of other ways to look at it. One, self-insured mortgages. Now under this program, the lender actually ensures the mortgage themselves. But how do they do that? They charge you a higher interest rate. You may pay half a point higher, half a percent higher, but if you're going to pay half a percent for private mortgage insurance, or you're going to pay half a percent higher on your interest rate, you might look at it on your interest rate because the interest is tax deductible. Whereas the private mortgage insurance is not tax deductible. Another way you may look at it is a 75/15/10 or a 80/10/10. Now stay with me because we're going to go through some numbers that on the 75 percent that is actually your mortgage, your first lien on your house. Now the 15 percent and 10 percent make up your down payment. Well you may already be saying, "Well, I don't have that much.". Well the 10 percent is what you come up with out of pocket. The 15 percent you borrow. It's actually a second lien or second mortgage. Now the interest on this 15 percent is tax deductible, so it is a little better than PMI. But the 15 percent and 10 percent you put down, so you have 25 percent equity in the loan. Most lenders require 25 percent equity. Now the 80/10/10 is just another version of the 75/15/10. The difference is some lenders, you can get by with only 20 percent down. How do we eliminate it later? Well a couple of ways. First off, request it. Call your mortgage company. Ask what is it going to take? Now what they're probably going to say is get an appraisal. Have it checked out, have an appraiser come look at the house. If you have 20 to 25 percent equity, if the value of homes have gone up in your area, or you've been paying it down over the years, they're probably going to release you from the private mortgage insurance, but stay on 'em, call about it, they're not going to volunteer.

Episode 009 1995 - 96 Season

| Attic Insulation | Clogged up Sink | Remodeling | Baking Soda | Foam Insulation | Private Mortgage Insurance | |

To order a Video Tape, call 1-800-TO-BUILD and ask for Episode #009.