How to Reduce or Eliminate Private Mortgage Insurance

Homebuyers that can't afford to put 20% down on the purchase price of their newhome often opt to take out private mortgage insurance (PMI) with their lender tohelp seal the deal. This insurance protects the lender from a default, and can addmore than $100 to a monthly mortgage payment.

Refinance Your Loan

Firefighters with a high interest rate on their mortgage and PMI might qualify fora mortgage refinance that could not only reduce their interest rate, but alsoeliminate PMI.

The PMI rules under any new loan terms are still the same: pay 20% or the homehas to appraise higher than the original loan. Homeowners usually have to pay forthe appraisal, but if the home value increases, it could be a win-win situation.

Firefighters with FHA-insured loans can refinance and obtain the lower annualMortgage Insurance Premium. For most FHA loans this will reduce the annualpremium from 1.35 percent of the loan balance to .85 percent. HUD explainedthat they expect 100,000 to 200,000 FHA-insured borrowers to refinance in thenext year.

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