Avoid Private Mortgage Insurance (PMI)

[Admin]

If you're a homeowner, you've probably heard of private mortgage insurance (PMI). It's an insurance required on any mortgage that has a loan-to-value (LTV) greater than 80%.

Having PMI on your mortgage can get costly, but there are a couple of ways in which PMI can be avoided:

• Get a second mortgage or piggyback loan to cover any loan amounts above 80% LTV. For example, if a property costs $100,000 and you only have $10,000 for the down payment, you can get a piggyback loan to cover the other $10,000. This method will keep your first mortgage at 80% which prevents the requirement for PMI.

• Get a subprime loan. Subprime loans do not require PMI. I know it sounds bad, but when your credit is marginal or borderline, it is sometimes more beneficial to go with a subprime loan.

[master01]

PMI has added an additional variable to its Risk Index model, which estimates the sensitivity of changes in affordability on the probability of house-price declines. This new variable considers a local affordability index (AI) and incorporates the impact of changes in affordability on the likelihood of extended price declines.

"The former PMI Risk Index performed well and proved to be a reliable tool in the assessment of geographic house-price risk. Our Risk Index has been valuable in assessing and managing risk in our own mortgage insurance portfolio. With the new affordability co-efficient in our model, we have enhanced the ability of our Risk Index to forecast the probability of future home-price declines," said L. Stephen Smith, President and Chief Executive Officer, PMI Mortgage Insurance Co.