Private Mortgage Refinancing
Private mortgage insurance (PMI) is an important aspect of aiding prospective home buyers when they do not have enough cash available to apply for a down payment purchase of a home. It is also very useful when refinancing while utilizing minimal equity. PMI will allow home buyers to purchase almost any home while offering minimum down payment. In most cases an amount that varies between 3 and 5 percent of the actual value of the home. The problem stands in the fact that the borrower still needs to pay insurance premium. We thus have lower down payments but higher monthly payments because of the additional costs the insurance brings in. To simplify the matter at hand, the borrower is paying for the lender’s expenses of having insurance to use in case the mortgage payment is failed. When dealing with private mortgage investments and refinancing we talk about high risks for the lender because of the small down payment. This is why insurance is needed.
As with regular mortgage refinancing we also have private mortgage refinancing. The downside is that we have private mortgage insurance to deal with as well. Some mortgage brokers will agree to drop the insurance if you meet their needs while others will still want to keep it active while refinancing. In most cases you can avoid PMI with the issuing of a mortgage that comes with higher rates of interest up front. This compensates the lender for the high risks it meets and will eliminate the need for PMI. We can also have the lender purchase the policy of the mortgage insurance and then make the borrower pay for it through the higher interest rates.
Different financial package needed while going for a private mortgage or for private mortgage refinancing will also have an impact on your loan possibilities. Many individuals go after an 80-10-10 refinancing package in order to avoid insurance altogether. This means that you will get your first mortgage for 80 percent of the home value and a second mortgage can be taken out for 10 percent of the home value. You are thus left with a 10 percent that can be put down directly as down payment or you can utilize 10 percent equity in your home. By utilizing such a structure the first mortgage lender will have a reduced risk and this will make it possible to avoid PMI on the loan.
The key to private mortgage refinancing stands in proper planning of all the aspects involved. You can cancel PMI under various conditions and you can even consider this to be a good turning point towards refinancing private mortgages at much better terms that will suit you better and will gain you money in the process. You will need to consult a specialist in order to lay down the exact procedure that needs to be followed because all the process is based on both the date the loan originated at and the value of the property itself. The term of the loan is also taken into consideration. The good news is that there are many non profit organizations that will offer free counseling in order to aid you in deciding what to do. It is always better to consult somebody that has experience in the field of private mortgage refinancing in order to aid you in making the best possible solution.
No matter what you decide to do regarding private mortgage refinancing, it is important to know that it is not as easy as it seems at first view. Proper analysis, calculations and acting fast is usually necessary.