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Private Mortgage Insurance: How Does It Work

Private mortgage insurance (PMI) is a policy that protects the lender in the case of default by the borrower. The lender is assured of being compensated for their loss if you fail to make your monthly mortgage repayments. This is not a policy that protects you.

Why Do You Need PMI?

The role PMI plays in financing is simple: it ensures cash flow. The lender needs to know they will be paid back even if there are some extraordinary circumstances.

Any loan where the borrower has less than a 20% stake in the property must have PMI. If you put down 3.5%, you can obtain a 95% LTV mortgage without premiums, but as soon as that drops below 80%, you will need to get PMI for your security.

The benefits of having PMI are that it allows you to finance more than just 80% of the value of your home.

Remember, you do not need PMI if you pay 20%. The lender will give you a lower interest rate because they’re protected in case something happens.

How Does It Work?

When you receive your first billing statement, the lender will give you an annual percentage rate (APR) that includes PMI. Many people think this is their interest rate for the year; it’s not. It’s simply a way of allowing you to see how much PMI you will be paying each month.

Your mortgage lender will decide your true APY (annual percentage yield) and will depend on your credit score and down payment amount.

When Do You Need PMI?

For conventional loans, the lender must ensure that you have PMI once your LTV (loan to value) drops below 80%, but again, there are exceptions. If you opt for an FHA loan, which means you’re borrowing less than 95% of the home’s worth, then you may not need any premium payments at all.

If the borrower is on the hook for PMI, they’ll see how much of each payment goes to principal, interest, and PMI on each billing statement.

For example, if you made $1,000 in payments over one month, your lender would charge you $200 toward your principal, $300 toward interest, and $100 toward PMI. This gives you a clear understanding of where your money is going each month.

What Happens If You Do Not Have PMI?

If you are not paying for private mortgage insurance, then the riskiest part of the loan is what’s called “uninsurable.” Since the lender will assume no one could pay them back, they will charge you a higher interest rate.

Basically, by not paying for PMI, the lender makes the riskiest part of your loan uninsurable and charges you more than if you had insurance in place. You may then be asked to pay an extra month’s payment each year to compensate the lender for this risk.

Contact Pacific Lending Group for Any Mortgage Insurance-Related Advice

If you have any questions about private mortgage policy, please contact a representative from Pacific Lending Group. We will be glad to answer any of your mortgage questions and help you with your home purchase or refinancing needs. Call 954-227-4727

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A Refinance Mortgage Can Affect Your Credit Score?

Refinancing may seem like a viable credit financing option in many circumstances. It involves replacing an existing loan with a new loan using the fresh mortgage to pay off the first one. Borrowers often choose loans with lower interest rates to refinance old loans. Also, a refinance mortgage allows borrowers the freedom to channel more savings into their savings account. Read more

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How To Lower Your Mortgage Rate Without Refinancing

Mortgage interest rates have seen record lows for the better part of this year, thus encouraging a surge in mortgage refinancing. However, we must still acknowledge that not everyone wants to replace their current home loan. Borrowers often wonder whether there’s a possibility of lowering mortgage interest rates without necessarily refinancing. Yes, you can lower your mortgage interest rate without refinancing, although the options available may be very limited. If you are facing financial downtime, you may qualify for a mortgage rate reduction. But most times, you’ll either need to turn to a new route to cut your mortgage costs or work towards getting a refinance approval. Here, let’s review some steps that you could leverage to lower your mortgage rate without refinancing.

1. Simply Call and Request a Lower Mortgage Rate

This may not necessarily be a conventional step, but it has worked for many people. We’ve heard of several cases where folks obtain lower interest rates just by calling their mortgage lender and requesting one.

Of course, you’ll need to indicate during your call that you do not want to refinance with them; otherwise, they may take you towards that route. Perhaps, it won’t be as easy as you probably want, but sometimes it’s just a matter of being direct with your request if you want a lower mortgage interest rate.

2. Speak to an Expert To Help You Do a Rate Review

Another option that you could try is speaking to an expert about your chances. Most South Florida mortgage lenders would be ready to look at your situation and offer recommendations based on current trends. Here at Pacific Lending Group, we have experts that can walk you through the rate reduction process by conducting a rate review for you. You can leverage our lender review service to compare your interest rate to new customers’ rates. This service helps you to assess your likelihood of being eligible for lower mortgage rates.

3. Hire a Mortgage Broker to Help You Negotiate

If you would feel more comfortable leaving the negotiation to an expert, then do. Mortgage brokers would usually help to conduct a rate review and tell you your chances. They’ll also justify to your lender why you should get a lower rate. However, we recommend opting for a professional broker. The best way to know whether a mortgage broker can help you handle the job is by looking at their records. Check what past clients are saying about their services. Ask about their success rates and how they go about the process.

4. Look Into a Recast as An Alternative For Refinance

Loan recasts are not as popular as refinancing, but they can also lower the monthly payments on your mortgage. The only difference is that you’ll need to adjust the amortization schedule of your loan. One of the most significant benefits of choosing non-refinance options is that you won’t need to reset the clock on your mortgage.

Conclusion

That’s it, some practical steps to follow if you want to lower your mortgage rates without necessarily refinancing. It’s often not as difficult as you think, as long as you are willing to follow the right route. Contact the experts at Pacific Lending Group to learn more about the possibilities. Call 954-227-4727

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Purchasing the Right Home: How to Plan for It

Purchasing a home in South Florida can be a big decision, and you must be well-prepared to ensure the process goes smoothly. You don’t want to buy a home only to realize that it’s not what you want or that you don’t have the finances to be able to afford it

When you want to ensure that you’re purchasing the right home and have figured out all aspects, some planning should go into it. Here is how you can plan better before you start looking at homes to buy:

Make a Plan and Budget

When you’re starting the process of looking for a home, you need to have some aspects figured out. You need to know what you’re looking for in your home. The number of bedrooms, bathrooms and so on should be decided before you start looking. It would be helpful if you determined a budget to help narrow down the homes you’re looking at.

You can also figure out what area of South Florida you want to be living in and whether you’re looking for any extra amenities. It will help you save time later when you’re actually going through properties.

Know Mortgage Rates and Financing Companies

You might need a little extra help when it comes to acquiring your dream home, and a home mortgage can achieve just that. There are many options available when you’re looking to get a mortgage to help you out with paying for your home.

However, you should look for a South Florida mortgage service that helps you qualify for the lowest mortgage rates and give you financial advice. You want to be able to trust your mortgage expert, and finding a trustworthy service in South Florida can require some research.

Consider Escrow

Many homes sold on the real estate market are sold upon specific conditions. The sellers might be selling their home contingent on several other factors, including that they can purchase another home first. You might also be in a similar situation, where you can’t go through with purchasing another home until the one you’re currently in is sold off.

You need to consider escrow as being a big factor in buying or selling a home. You might have to wait a while before moving into the property you’ve purchased, so ensure that you know the timeline when you’re buying the home.

Know the Resale Value

When purchasing a home, you have to consider the possibility that you might not end up living in it forever. When it comes to selling off a property you own, several factors can determine its resale value.

You might be looking to flip the house and remodel it to make its value much higher. As a property owner, resale value is something you should be considering before you purchase any home in South Florida.

Looking for Home Financing? We’re Here to Help

When you need a little bit of help financially to help you get the home of your dreams, Pacific Lending Group is here to help. Many types of mortgages are available, and we will help you get the lowest rates so you can worry less about paying back your home. Call 954-227-4727 to get started on your home mortgage process.