Private Mortgage Insurance, or PMI, is an additional monthly fee required by most lenders when the down payment on a home is less than 20 percent. Here are some ways to get around PMI.
- Gather or borrow enough funds to make your down payment greater than 20 percent.
- Buy a less expensive property to get your down payment to or above 20 percent.
- Increase the amount of the purchase price of the home and have seller credit the additional money toward a greater down payment.
- Find a lender who will charge a slightly higher interest rate in lieu of requiring PMI. The benefit here is that you’ll be paying a slightly higher payment due to the higher interest rate, but all the interest will be tax deductible.
- When the loan is paid down to 20% of the original loan amount (not purchase price) the homeowner may request that the PMI be removed with the necessary
- documentation (an appraisal). The lender will not notify the borrower
- it is not currently required by law) when the homeowner has reached that magic
- number of 80% loan to value. Legislation is pending currently to make lenders more responsive to borrowers regarding notification and removal of PMI.