Is Private Mortgage Insurance a rip-off? A lot of people will tell you that private mortgage insurance (PMI) is a scam. You have to pay more money monthy as part of your home mortgage payment to insure that you’ll pay your own payments. It adds money to your mortgage payment BUT what if I told you that instead of looking at it as a bad deal, you should consider it a great tool to use. I’ll show you how it can save you a lot of money.
As shown in the video above, if you were to buy a $400,000 house with just 5% down, you’d likely pay $15,000 to $20,000 in Private Mortgage Insurance over the next 10 years.
However, if you decided to rent for two more years while trying to save up the extra money for the downpayment to buy a house, you would spend a lot more. If your monthly rent is $2500 per month, you’d spend $60,000 on rent in the two years. The money you spend on rent is gone. You’ll never get that back.
If you pay the PMI and move into your new home ASAP, you’ll start gaining equity by appreciation, you’ll pay down the principle amount and over time it will save you a lot of money. PLUS, if the house value goes up and you pay down the mortgage, you’ll likely be able to refinance and remove the mortgage insurance after a couple of years.
After reviewing the full picture, you can see that Private Mortgage Insurance is a great tool that you should use to get yourself into a home as soon as you can. PMI isn’t a scam. It can actually save you a lot of money versus paying rent and waiting to become a homeowner later.
Do you have more questions about buying a home? Reach out to Andy Hawbaker, Realtor with Coldwell Banker Realty in Loveland, Colorado. Andy loves working with First-Time Home Buyers. He can help.
Thinking about buying a home? Click here for my Home Buyer’s Guide.