If you’re refinancing your home with an FHA mortgage loan or have less than 20% equity in your home, you’re probably going to be required to purchase Private Mortgage Insurance (PMI). The premiums for mortgage insurance are quite expensive and it can be difficult to get out of paying. Here’s a primer on the basics of Private Mortgage Insurance from the TruthAboutMortgage.com:
If you happen to take a mortgage out for more than 80 percent of the appraised value or purchase price, you’ll likely need to pay for mortgage insurance. And contrary to what you may think, mortgage insurance protects the mortgage lender from borrower default. Not you from anyone or anything else.
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http://www.thetruthaboutmortgage.com/what-are-mortgage-insurance-premiums/
The problem with mortgage insurance is that the premiums you’re paying do absolutely nothing for you but cost money. FHA backed home loans require mortgage insurance; however, many people aren’t aware that VA home loans do not.
Anything that drives up your monthly payment like PMI or yield spread premium is going to keep costing you exponentially over the lifetime of your home loan. These expenses make it difficult to recoup the closing costs on your mortgage refi, making your lender’s best refinance rates less beneficial in the short-term.
You can learn more about mortgage refinancing without unnecessary markup or junk fees by registering for my free Underground Mortgage Refinancing Videos.