A Quick Guide to PMI

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PMI, or private mortgage insurance, is a necessity most times. If your down payment is less than 20% of the purchase price of the home, then you’ll need to pay for this additional insurance in order to secure a loan for the home. This policy protects the lender if the borrower cannot pay the loan installments. This way, the lender knows they will not lose money in the event of default. 

Private mortgage insurance is also required if you refinance your home when it has accrued to less than 20% equity.

Here are a few other key points to remember about PMI.

Fees

The fees involved with private mortgage insurance can range based on a few factors, including the actual size of the down payment and your credit score. You can expect the cost of the insurance to be somewhere between 0.3% and 1.5% of the loan amount per year. Homebuyers can pay PMI premiums either monthly or as a large payment up front, though some policies may require the borrower to pay installments versus a lump sum.

You Can Cancel PMI

The lender will automatically cancel your PMI once the loan drops to 78% of the home’s value. For this reason, you’ll want to keep track of your payments to see how close you are to paying off your loan. When you’ve paid your loan down to 80% of the home’s original value, you may ask your lender to discontinue the insurance premium payments.

What Is The Loan-To-Value Ratio?

This ratio is the amount of mortgage debt as a percentage based on how much the home is worth. It’s calculated by the following formula:

Amount owed on the mortgage/Appraised value

If a home is worth $100,000 and the buyer owes $80,000 on the home, the loan-to-value ratio is 80%. This means the borrower can request the lender cancel the insurance.

FHA Loans Have Different Requirements

If you secure an FHA loan, they require the payment of PMI premiums for the entire life of the loan. You can’t cancel these insurance payments, but you can refinance the loan in order to get rid of the insurance. This means that you will no longer have an FHA loan.

Private mortgage insurance can be confusing, but, as a first-time homebuyer with little capital, the fees may be worth it when you’re able to secure your first home.

The Best Budgeting Apps for Tracking Your Spending

The App Store is saturated with tools for helping you keep track of your budget, spending, income, credit score, and more. However, each app is different, offering varying levels of user-friendliness, security, and helpful features. We’ve built a list of the most useful apps for keeping track of your finances–from budgeting and paying bills, to learning about investing and credit, these apps have you covered.

Mint

Mint is the juggernaut of budgeting apps. You can securely sync all of your bank accounts, loan accounts (credit card, student loans, etc.) and even income accounts like PayPal. Once you’ve logged in, Mint does most of the work for you. In fact, just yesterday I got a notification from Mint that I was charged extra for my gym membership.

In the app or from the website you can design your own personalized budget that includes things like food, shopping, groceries, gas, etc. When you make a purchase with one of your linked cards, Mint automatically sorts the purchase into the correct category.

Aside from budgets, Mint also helps you set up a timeline for paying your debts. It shows you how long it will take at your current monthly payment amount and tells you how much you would save in interest by paying it off faster.

PocketGuard

PocketGuard is like a sleek, minimal version of Mint. However, its main strength, as the name suggests, is security. It boasts several barriers to identity theft and complicated and technical security measures that we won’t get into here (we’re talking 128-BIT SSL encryption).

PocketGuard is also simpler than Mint, both in terms of content and display. Plus, you won’t see as many advertisements for credit cards that Mint so slyly sneaks into just about every screen you view.

Home Budget with Sync

The name’s a little awkward, we know. But they added that “with Sync” in there for a reason. Home Budget’s most redeeming feature is that it allows you to sync up with other budgets in your household (your spouse, roommate, etc.). This makes it much easier for couples who are splitting bills to keep track of their expenses and savings.

One piece of advice is to choose what you share wisely. Not everyone wants to share all of their personal finance information with others.

You Need a Budget

You Need a budget, or as its many happy customers call it, YNAB, is a whole lot more than just a way to keep track of your money. It boasts several learning resources that empowers you with financial knowledge. Where other apps just let you plug in numbers, YNAB teaches you what all of those numbers mean and helps you make more informed decisions with your money.

YNAB is created with the intention of reducing your financial stress. It has simple videos, instructables, and more to help you learn the ins and outs of budgeting. Then it helps you build your own budget and stick to it with many of the same features as Mint or PocketGuard.

Personal Capital

If you’re ready for the big leagues of finance and want to start investing and tracking your assets, Personal Capital will help you get there. This app is designed for managing and analyzing assets.

The app’s main features are broken into categories: cashflow, retirement, investing, and net worth. The outstanding feature here is investing. It simplifies investing, checks up on your investments, and gives you useful tips that will help you get your toes wet in the investment world.