THREE REASONS WHY PMI COULD BE YOUR FRIEND
Illustrates three major benefits to putting less than 20% down
Three reasons why PMI could be your friend? Many mortgage loan programs today allow homebuyers to use less than a 20% down payment when buying a house. When you do this, you are often required to pay Private Mortgage Insurance (PMI). This increases your mortgage payment slightly. Here are three reasons why PMI is actually a huge benefit to you:
1 – PMI Allows You to Buy Now Instead of Waiting
For example, assume houses in your market are going up in value by 3% per year. If you buy a $200,000 house now, you save $6,000 vs. waiting a year. Plus, that $6,000 in house price appreciation becomes extra wealth that you’ve just created for yourself. PMI allows you to buy now and benefit from future house price increases.
2 – PMI Frees up Funds to Pay off Higher Interest Rate Debt
For example, if you have credit card debt at 9% and mortgage rates are 4.5%, you may be better off putting less than 20% down. Instead, you could use a portion of your down payment funds to pay off the credit card debt. PMI allows you to do this.
3 – PMI Frees up Funds to Invest at a Higher Rate
When you use funds for a large down payment, you are missing out on the opportunity to earn a rate of return on that cash. Is your rate of return on investments greater than the cost of a mortgage with PMI? If so, it may make sense for you to put less than 20% down, use a higher balance mortgage with PMI, and keep your funds invested.
PLEASE NOTE: This article is provided for illustrative purposes only. It is not an offer or commitment to lend you money, and it is not an advertisement for a specific mortgage or a specific interest rate. Contact me to run the numbers for your situation.
Source: CMPS Institute
Carrero Mortgage Advisors, LLC NMLS# 1734670 is an Equal Housing Opportunity Lender. © Copyright 2019 and is headquartered at 3600 Red Road Suite 310, Miramar, FL 33025. All rights reserved. Nationwide Mortgage Licensing System (NMLS) Consumer Access Web Site: www.nmlsconsumeraccess.org.
Figure: 7 TAC 80.200(b)
“ANY CONSUMER WISHING TO FILE A COMPLAINT AGAINST A COMPANY OR A RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550. THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT-OF-POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.“