Homeowners who are looking to refinance their existing mortgage but do not have either 20% of the homes value in equity, or enough cash to cover the difference, are often required to get PMI (Private Mortgage Insurance). PMI can add anywhere from $55 to $300 extra to your monthly home loan payment. Here is some help minimizing these costs:

The Lender Paid Mortgage Insurance (LPMI) Option

Sometimes a mortgage lender will pay the high costs of mortgage insurance in exchange for charging you a little more on your interest rate. You may be thinking “Who wants a higher interest rate?” But if you are worried about not spending over a certain limit every month on your mortgage payment, this may be your best option.

Here are two examples to help you compare the difference:

1. Loan Example with PMI
- $100,000 purchase price
- 5% down payment ($5,000)
- 30 year fixed rate of 5.875%
- Payment = $623.71 ($561.96 of principal & interest + $61.75 of PMI)


2. Loan Example without PMI
- $100,000 purchase price
- 5% down payment ($5,000)
- 30 year fixed rate of 6.375%
- Payment = $592.68

As you can see example 2 without the PMI but the added interest rate is still $31.03 cheaper every single month. This equals $372.36 in savings every single year of your mortgage. If you do the long term math on a 30 year mortgage the savings are $11,170. Make sure you do all the correct calculations before doing a home mortgage refinance. This can be a great way to easily save money every single month.

-M Petrone

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