Property mortgage insurance (PMI) is a tool offered by lenders that allows home buyers to purchase a home with a lower down payment than the traditional 20% required. This type of insurance is designed to protect your mortgage lender in case you default on the loan. Typically, a homeowner who must purchase PMI is required to keep it until reaching 20% equity. Needless to say, homeowners typically are eager to get rid of their PMI. As long as your mortgage doesn’t have a prepayment penalty, you will have the option to make extra payments on a regular basis or even make one or several larger payments to get rid of PMI. Paying more than the minimum mortgage payment amount can help you reach 20% equity and eliminate PMI faster.
Prioritizing your payments
As tempting as it may seem to put more money towards your mortgage to help build your equity faster, it is important to consider your overall financial situation. For example, if you have high credit card balances at interest rates that are likely higher than your mortgage interest rate, it may be a wise decision to eliminate this debt first. Furthermore, you may also want to analyze your retirement savings plan. If you are not saving enough for your retirement, you may be better off putting those funds towards your 401(k) or an IRA so they can benefit from compound interest. Lastly, you should always have an emergency fund to cover an unexpected event such as a job loss, medical bill, or home maintenance repair. Once you have prioritized your savings, you should be in a better position to shift your focus to building home equity and eliminating PMI.
Depending on when you purchased your home, it is possible that you may also have your property reappraised and be able to remove your PMI as well. Nonetheless, you should constantly be analyzing your financial health to put yourself in the best position for the future. As we have mentioned in previous articles, home ownership is one of the best ways to build wealth. If you are a homeowner, you are well on your way.
Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. At Live South Florida Realty, Inc., we have been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our recently launched “Florida Home Search” app is now available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!