Your costs when you refinance home mortgage loans

Private Mortgage Insurance vs. 1st and 2nd Mortgage

For the last couple of years lenders have many times been doing a 1st mortgage for 80% of the sales price and a 10, 15 or sometimes even 20% second mortgage for the rest. This was done to avoid paying private mortgage insurance which is required if you finance more than 80% of your sales price.

There are several things to consider.
There are now mortgage insurance programs that are not paid as a premium, but are paid in the form of a higher interest rate. This because it is in the form of more interest is, as allowed by law, tax deductible. The mortgage insurance premium paid is usually of no benefit to the borrower. Now that there are other options for private mortgage insurance all aspects have to be carefully considered to see what the best one is.

There are often more costs involved with getting a 1st and 2nd mortgage.
The 2nd mortgage is usually a higher interest rate and may be a variable rate or a balloon loan (one that payments are amortized over a 15 or 30 year period, but the loan matures in a lesser number of years; usually 5, 10 or 15.) Depending on each situation borrowers need to make sure they're comfortable knowing that their interest rate may increase resulting in higher payments or they may have to refinance at the end of their balloon term.

Variable rate loans normally are interest only payments so the required payment may be less, but if only paying interest obviously the balance will remain the same. There are some 30 fixed rate 2nd mortgages being offered. Again there are many variables when determining which private mortgage insurance option is best for each borrower. You need to make sure that your lender offers many options and helps you decide which one is best for you.

Many factors need to be considered when deciding which mortgage insurance options. First  you need to apply, find out the total payment, tax deductibility, and approximatiately how long you plan to stay in the home. These are just some of the things that you should discuss with your lender about private mortgage insurance to determine what is best for you. Make sure you have a lender that is knowledgeable and offers lots of options.

No more guess work on what your costs will be. Now that you know - Let them show you what they can do for you with a free quote. Apply for your home mortgage refinance with confidence!