Recent Posts
Blogroll

Avoid payment PMI on a Nevada Mortgage

PostDateIcon November 19th, 2008 | PostAuthorIcon Author: admin

Avoid Paying PMI on a Nevada Mortgage
Did you know that by using a Piggy Back loan you can avoid paying PMI? This can be used either when you purchase or refinance your Las Vegas home. By using this loan you will be able to save as much as a couple of hundred dollars each month on your Nevada mortgage. 

The average home buyer often doesn’t have the 20% down as required by most conventional Nevada Mortgage Lenders. This is also common in the case of a refinance; your average home owner does not have 20% in equity at the time of the refinance. Although a lot of homebuyers/owners can qualify because of PMI, it does increase payments significantly. You can view the portion you pay for PMI as rent because that portion of your payment does not benefit you at all.
Private mortgage insurance (PMI) is paid to a Mortgage insurer who protects the Lender against loss in the event of a default on the mortgage. The conventional thought in the Lending industry is that if a default occurs and the property has to be sold quickly, often it will sell for less than 80% of the value. In this situation, the Mortgage Insurance company will step in to pay the Lender for any loss incurred.

The loan amount needed to close your Las Vegas purchase or refinance that is above the first 80% is the Piggy Back Loan.  By having a 80% first mortgage only and have a 2nd mortgage (Piggy Back) this avoids the PMI requirement. An additional benefit is that you will be paying on the principal on both loans and the interest may be tax deductible. Payments toward PMI are not tax deductible at all.
The staff at Vegasbestmortgage.com can help you structure a loan package to take full advantage of the Piggy Back loan. For example, we can help a borrower who needs a 95% loan-to-value on a purchase or refinance of a Las Vegas with a 80% first mortgage and a 15% 2nd mortgage. By going this route you will not have to pay PMI. You will have two separate mortgage payments to two different mortgage companies. The interest in the 2nd mortgage is always higher than the 1st mortgage, so by going this route you should expect that. Having the two mortgages is easily justified, though, when you consider the net monthly savings incurred by not having to pay PMI. The 2 loan route will save you more.

Sometimes the Las Vegas home-owner opts to have a Home Equity Line of Credit (HELOC) instead of a fixed rate 2nd mortgage for a Piggy Back. The major advantage to having a HELOC is that as you pay down the debt you have access to the funds that can be drawn out for such things as buying a new car, college education, or home improvement, without having to reapply. The other feature of this particular loan is that the required payment is interest-only, so you must make an effort to pay more than the required payment in order to create the available credit.
Alternatively, this second mortgage can be structured as a “closed-end” loan with a fixed payment. This is for a fixed period of years (15, 20 or 30) with equal payments being made over that period. This alternative is better for a borrower who lacks the discipline to make larger payments on the Line of Credit mentioned above.    

Take this into consideration: for a Las Vegas home buyer who purchases a $400,000 home with 5% down, the PMI payment would be $243 on a 95% loan. Now let’s take a look at how we have structured a Piggy Back loan by having the borrower get a 80% mortgage and a 15% second mortgage. This will result in a savings of $171 per month. And without having to pay the PMI, your net savings over 5 years is $13,501. Over 10 years the savings will amount to over $31,000. The borrower net worth will increase by a significant amount with the savings and the appreciation of the Las Vegas home value.

Remember that for most of us, our mortgage is the biggest financial decision of our life. Please consult only with an experienced full-time professional. Call the staff at Vegasbestmortgage.com today.

51 Responses to “Avoid payment PMI on a Nevada Mortgage”

Leave a Reply

Enter YourName@YourKeywords in the Name field to take advantage. Commentluv use

Mortgage Loan Calculator
Powered by Mortgage Loan
US AverageMortgage Rates
30 Year Fixed loading...
15 Year Fixed loading...
5/1 ARM loading...
Categories
RSS News

Contact Us | Terms of Use | Trademarks | Privacy Statement
Copyright © 2009 Las Vegas Home Mortgage Refinance Team. All Rights Reserved.