By Jayson Stebbins Mortgage Professional

The most common questions about MI ( sometimes called Private Mortgage Insurance or PMI ) are these : how do I avoid paying it , and how do we remove it once we have it ?

MI avoidance is not always easy especially since most of the time it requires a 20 % down payment . Here are some ways to avoid paying MI :

1 ) First and Second mortgage combos : Using a combination of a first mortgage and a second mortgage , you can eliminate the MI requirement and still put as little as 10 % down . This creates value as every dollar of your payment is now eligible for the interest deduction at year end .

2 ) Higher rate : some programs exist that will allow you to do as little as 5 % or 10 % down and have no MI , but you will pay for it in a higher interest rate . When you look at the payment side by side many times the higher rate does not result in a higher payment as MI is out of the picture , and again every dollar of the payment is now a benefit on the tax return .

3 ) Buying out the MI : it is possible to do a one-time payment and pay the MI all at once . Usually the cancelled monthly MI payment will result in a manageable recapture over time , and could justify the upfront expense .

As for the removal of MI , it is important to note that some programs do not allow it at all . In the past decade the rules of MI removal have changed many times , so the removal of MI depends on the age and type of your mortgage . Here is a quick primer :

FHA loan : depending on when you closed on your FHA loan , the only way to remove the MI is through a refinance into a new loan . Older FHA loans have a formula that allows removal without a refinance . Contact your lender for more information on how they handle the removal .

Conventional loan : this is the loan that has the easiest path to MI removal . Refinance is always an option . However , if you have built your equity position to 20 % you can petition the removal of MI by your lender . They may require an independent appraisal or other documentation to comply with the removal . Check the disclosures on MI in your original loan package for details .

Other loans like USDA do not allow for MI removal so a refinance would be the only way to remove the monthly MI liability .

When strategizing about MI , it is always good to look at your long-term plan , shortterm cash flow , and the power of money . Sometimes MI is unavoidable , but with some creative thinking and planning you can make other solutions work for your family .

Jayson Stebbins is a 23 year veteran of the Mortgage Banking industry and an Accredited Mortgage Professional through the Mortgage Bankers Association . He grew up in Morgan Hill and currently lives in Gilroy . He is the local Branch Manager of Guild Mortgage , a 56 year old mortgage banking firm . His office is in Morgan Hill and serves all of Santa Clara , San Benito , and Monterey counties . You can reach Jayson and his Team at 408-782-8800 or at jstebbins @ guildmortgage . net

Jayson Stebbins is a licensed mortgage agent in CA for Guild Mortgage Company NMLS # 38463 ; Licensed by CA Disclosure : Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act . NMLS Company Unique ID 3274 ; Branch Unique ID 38480 . The postings on this editorial don ’ t necessarily represent the positions , strategies or opinions of Guild Mortgage Company or its affiliates . This information is not guaranteed to be accurate and shall not be construed as a guarantee of loan approval . All loans are subject to underwriter approval , and are subject to change without notice . Equal Housing Lender .

Guild Mortgage Company presents

Free Seminar showcasng many financial options available to you

Saturday , March 25th , 2017 at the Morgan Hill Community and Cultural Center

Madrone Room • 10 am to Noon ( lunch will be provided and there is a free raffle at noon )

RSVP : nperino @ guildmortgage . net or call 408.782.8800

68

GILROY • MORGAN HILL • SAN MARTIN MARCH / APRIL 2017 gmhtoday . com