Information on PMI for Refinance Loans - The Bills.com Blog

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Information on PMI for Refinance Loans

Question: If you refinance do you have to pay PMI? Also, are there any refi loans that are 100% loan to value?

Answer: Even with a refinance, you will end up paying for PMI (Private Mortgage Insurance) if you borrow more that 80% of the value of the home. Lenders or banks require PMI when you the buyer has a down payment of less than 20% of the askingprice of the home. The problem with private mortgage insurance is that it raises your monthly payment and, unlike the interest on a traditional mortgage, PMI is not tax deductible. You can eventually cancel private mortgage insurance if you can prove that you owe 80% or less of your home's value.

When making loan decisions, one of the most important factors potential lenders review is the loan-to-value ratio, or LTV, of the proposed loan. This ratio compares the amount of the loan you are trying to obtain to the current value of your home. The interest rates charged on 100% loan-to-value refinance loans, such as the one you propose in your question, are generally

higher than the rates charged on loans with a with lower loan-to-value ratios (it's intuitive, since they are riskier loans for the lender). However, if your credit score has increased significantly since you first purchased your home (or if your income has risen), you may be able to obtain a lower interest rate despite the fact that you are refinancing at 100% LTV.

There are lenders out there that will lend even up to 100% LTV, but you will have to be prepared to pay more in interest. Most homeowners wait until they have some equity in their homes before refinancing, as obtaining a 100% refinance loan can be more difficult than qualifying for 100% financing at

the time of purchase. You should contact several potential lenders to discuss the loan terms they can offer you on a refinance loan. After speaking with several lenders, you should be able to determine whether or not a refinance loan is a financially viable option for you.

If you want an introduction to pre-screened mortgage lenders, Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs.

I hope the information provided helps you Find. Learn. Save.

Best,
Bill
www.bills.com

Also, make sure to get a free financial health check-up with Bills IQ!

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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

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