“A mortgage is expensive enough, right? So you definitely don’t want to be paying more than you have to on it. But, you might have to if you require private mortgage insurance. Private mortgage insurance is insurance that covers the lender should you default on the loan. It really holds no benefit to the homeowner, really. But it is a cost you might face – if you don’t know these four possible ways to get around it.
Make a 20% or more down payment
This isn’t just a possible way to avoid private mortgage insurance – it’s a surefire one! Private mortgage insurance is only required when you have less than 20% of your down payment when applying for your mortgage. Have it in hand when you go to get your mortgage, and you won’t be asked to pay private mortgage insurance.
Pay more interest
Agreeing to pay a higher interest rate might mean that a lender will waive private mortgage insurance. Not all lenders will; but if they do, you have the added advantage of having tax-deductible interest. Private mortgage insurance can’t always be deducted.
Collect Home Equity
If you do end up paying private mortgage insurance at the time you get your mortgage, you can ask for it to be removed once you have more than 80% equity in your home. So keep track of your principal, and make sure to get the insurance removed as soon as that equity hits 80%!
Get a piggy-back mortgage
A piggy-back mortgage is a home loan in which you actually get two mortgages. The first mortgage covers most of the home, about 80%, while the second mortgage will cover the remaining value of the home, usually 10% or 20%, whatever the remaining balance is. Piggy-back mortgages can be very complicated, and they always involve a lot more paperwork than conventional mortgages. In addition to that, a piggy-back mortgage might not always prevent you from paying private mortgage insurance. If you think that you’ll end up paying private mortgage insurance, and you think this is a good way to do it, talk to an Ottawa mortgage broker to help you sort through it all and make sure you don’t end up paying more than you have to!”
