Do I have to have Mortgage Insurance?

Question

I was just wondering how much down if any do you have to have in order to avoid Mortgage Insurance. Please let me know thanks :)

Answer 1

There are several different types of mortage insurance. If you are referring to PMI you need 20% down to escape that. If you are talking insurance that will pay off your mortage if you or any other signer would die, that type is optional. It is only a good deal if someone dies, how much is peace of mind worth?pp

Answer 2

The magic percentage to avoid PMI (mortgage insurance) is 20% down. It's a tough break if you have to pay this insurance though -- it's a hefty amount on top of your mortgage each month -- like in the $200 range! It's very important to really understand all of these things because your mortgage will include, principal (that's a really low portion of your payment each month -- most of your payment goes for interest), your interest, your property taxes, and your home insurance; then if you have PMI, that gets added. That's why when you look at the figures for borrowing that are advertised they don't sound too bad -- Borrow $200,000 and pay $500 per month?!?!? Don't you believe it!

Answer 3

Good idea to bundle the insurance. I would have thought you would have to have this coverage in place before you could close on the home. If you get a home ins. quote that does NOT sound reasonable, considering shopping the bundled service to other carriers. They will ask you basic stuff like sq footage, # bedrooms, construction materials, proximity to fire station, and zip code, and everything is pretty much calculated off standard formulas. They don't require additiona inspection, although I have been told that they may do "drive-bys" to make sure that people aren't taking out fraudulent policies (like on an empty lot or a shack or something). Ask about the deductible, ask about how they calculate the "contents", and about terms of homeowner's liability. A good agent will explain all this to you and once you get the spiel from one, you should be able to compare apples to apples on other policies. If you live in a flood plain, you will have to have separate coverage for that. States like LA post-Katrina are very picky on this now and premiums are therefore higher. You may want to do some research to see which insurance companies have been LEAST affected by Katrina claims (and maybe now the CA wildfires) as they will possibly be more reasonable on rates for new policies. Good luck!

Answer 4

You need a 20% down payment. Mortgage insurance is now tax deductable. Also, you could split the loan into 2 loans, the first mortgage at 80% loan to value and the 2nd mortage for the difference after your down payment. The rate on the 2nd may be quite a bit higher depending on your equity position, credit score and loan to value. You may be better off paying the mortgage insurance if you dont have the 20% down.

Answer 5

You must put 20% down to avoid paying mortgage insurance. However, mortgage insurance on a $370k home is only about $198 per month, so if you can't afford to put 20% down, just try and include at least $100-$200 in your monthly payment, to see if you can afford it. Your loan broker will help you figure all this out!

Answer 6

Hello Ang23,
Banks require a PMI for anything less than 20% down, Banks like to know that their mortgage is secure. This could stop if the equity in your property increases in value or if the prices in your area go up. I put 10% down, and had to wait a full year to call my mortgage company and updated on the current pricing in my area. It required a few comps from a local Realtor and a written request. But its well worth it. Hope this helps.

Answer 7

I haven't read all of the answers so i'm not sure if someone has given this answer, but you could possible get an 80/20 loan and avoid the PMI. Talk to your mortgage person about it.

Answer 8

Mortgage insurance is the a choice....if the lender says that you have to have it then you do...it is more of a protection for them if you pass away...then they don't have to worry about taking back the house...but, if you have loads of money then they wont require it....also if you have loads of money you don't need it because in the case of a death then your house will be paid off...that is not in life insurance it is in accessible cash ready and available to put against the mortgage.

Answer 9

You need 20% down to avoid mortgage insurance.

It will be removed once you get 22% equity, or if you get ir appraised with 20% equity.

The bad thing is home values will continue to fall for at least another 12-18 months, so you will have to regain all that lost equity, then another 20%, before you can get rid of PMI.

Answer 10

George is right you have to have a minimum of 20% equity in the purchase however given the intricacies of how it works and when it comes off and how and what you must do here is the link you need to research
HUD Private Mortgage Insurance (PMI) Information: http://www.hud.gov/offices/hsg/sfh/res/respapmi.cfm
Best of luck on your research