Why Buying A PMI May Not Be The Best Choice?

Buying a home is the dream of everyone but everyone doesn’t find it easy to realize the same. There are lenders to help young homebuyers make the down payment and initiate the purchase of their dream home. Different providers are helping the interested buyers with tailored mortgage insurance plans and further get into their own home. In this article, we are going to talk about major things one should know about private mortgage insurance.

Try To Avoid PMI

Private mortgage insurance isn’t something the mortgage expert will suggest buying and there are reasons for the same. These plans come with expensive premiums and are made for those who can’t the down payment required. As a homebuyer, you are suggested to avoid the PMI if possible and try paying the down payment of 20 percent of the total home value. In case, you don’t have enough savings you can wait for some time or try to get the amount from an alternate source.

·       PMI Is For The Lender

Basically, these plans are made to protect the lenders and not the borrowers. They are specifically designed to protect the amount borrowed, in case the borrower goes default. Under these conditions, the insurance provider pays an amount to the lender to compensate the amount borrowed. There is no protection of the borrower’s mortgage and the whole family will have to suffer if they lose the home.

·       Check The Different Plans

PMI isn’t the only option to go with and there are insurers offering different plans specific requirements. You can simply request a quote on insurer’s website or insurance portals to receive multiple mortgage insurance quotes shortly. Various representatives will reach you to explain the plans available for you and you can choose your preferred one after comparing the coverage and benefits offered.

·       Credit Score And Down Payment Amount

The cost of PMI depends on various factors and credit score is one of them. People with a higher score are considered a lower risk and receivecheap mortgage plans while an applicant with a lower score may have to pay more for the same. A credit score above 625 is considered a good one and interested homebuyers can check their scores online too. Also, the amount paid as down payment plays a big role in deciding the monthly premiums. Paying a bigger down payment helps to get a cheaper premium and interested buyers can get opinions from online experts as well.

·       Different From Mortgage Life Insurance

Often, people confuse PMI with mortgage life insurance but both plans are quite different. The first protects the lender from losing their money while the latter helps the insured keep their mortgage going if they fall ill or meet an accident. Under these plans, the insured makes a fixed premium every month and the provider takes care of their premiums in case they go off work. Depending on the coverage amount, they provide a monthly income to pay the premiums and the loan is waived off if the insured passes away.

·       Tax-Deductible Options

Rules on deducting the taxes on the PMI investments is not so clear. An insured may or may not need to pay the federal taxes depending on different factors that may include but not limited to the type of plans, the total value of home and state. To get a clear view of the same, one is supposed to get the help of online mortgage experts and they will guide with the most relevant piece of information. Also, they will suggest the ways to save taxes on the investments in mortgages.