Mortgage insurance is required by some lenders when they believe the home buyer is at higher risk of defaulting. This can occur when a down payment is less than 20% of the homes purchase price or if it is an FHA or USDA loan. Mortgage insurance protects the lender from losing their investment, so if you don’t pay your mortgage payments, the lender still gets some of the principal. Wondering how you can lower your mortgage insurance payments? Read on for some tips.
Increase Your Credit Score
Having a higher credit score tells lenders that you are more likely to pay off your debt in time. Since mortgage insurance is protecting the lender from you not paying off your loan, increasing your credit score will give you more power in negotiating lower mortgage insurance rates.
Build Your Home’s Value
If the value of your home increases, this gives you a chance to renegotiate your mortgage insurance rates. There are a number of ways to increase your home’s value, some as simple as getting it appraised again. You can also do home improvements and renovations that will make your home worth more.
Pay Down Your Loan
If you have mortgage insurance because you put less than 20% down on your home, making additional payments to pay down your loan faster will give you an opportunity to get better mortgage insurance rates. When possible this is a great way to lower your rates or potentially not have to pay for mortgage insurance at all.
Refinancing Your Mortgage
Taking out a new loan to pay off your old one can be a viable option but only if you are getting a good deal on your new loan. If the loan is for 80% or less than the value of your home, you may be able to avoid mortgage insurance completely.
Before taking any of these actions, make sure to talk to your lender and see what advice they have for you. After all, they are the ones that know your situation best.