One of the costs of owning a home can be home mortgage insurance. Mortgage insurance is insurance YOU buy in order to cover the rest of the mortgage in if you default. However, it is worth noting that not everyone needs mortgage insurance. But do you? The answer seems fairly simple: If you are putting less than a 20% down payment on your home, then most lenders will insist that you pay for mortgage insurance so that they are protected if you default.

But there are ways around having to buy mortgage insurance. The most common way around it is through a piggyback loan. In this scenario, you borrow the amount you need to make the 20% down payment, and then roll that second mortgage (that’s what it is) into the total amount. This can actually get more expensive than holding private mortgage insurance.

And, it is worth noting now, that way back in 1999 a new policy started. The FTC reminds us:

For home mortgages signed on or after July 29, 1999, your PMI must -
with certain exceptions - be terminated automatically when you reach 22
percent equity in your home based on the original property value, if
your mortgage payments are current. Your PMI also can be canceled, when
you request - with certain exceptions - when you reach 20 percent
equity in your home based on the original property value, if your
mortgage payments are current.

As you can see, mortgage insurance might not be a bad idea. Carefully consider your options, and decide whether you might save money by getting mortgage insurance rather than a piggyback loan.

Tags: home mortgage, personal finance, financial planning, finances,
financial goals, home mortgage insurance, mortgage insurance, piggyback loan