Private mortgage insurance (PMI) is often required for those who put less than 20% down on their homes. This insurance protects the lender from loss if you default on your home mortgage loan. While PMI can make it possible for you to qualify for a loan with a smaller down payment, you will need to pay a good sum for it. On a $200,000 loan, you will pay a little less than $100 a month for PMI.
Unfortunately, depending on the size of your down payment, you may be paying your mortgage (and PMI) for years before you own 20% of your home and can drop PMI. You will likely spend thousands of dollars on PMI.
If you would like to put more money on your mortgage quickly, one thing you can do is refinance your home. This can be especially usefully if you took out your loan several years ago when rates were higher. Refinancing and getting a lower interest rate means more of your money will be applied to the principal if you continue to make your original loan payment. A simple refinance can shave years off the time it takes you to be free of PMI.
To begin the process, shop for mortgage rates online using a site like http://www.mortgagerates.ca. From there, you can begin to talk to specific lenders.
Keep in mind you may need to fill out a mortgage application when you refinance as well as bring in all pertinent paperwork including W-2s, federal tax refunds, paycheck stubs and proof of investment income.
Another important variable is the cost to refinance. Refinancing can cost a few hundred dollars. How long will it take you to recoup that money? If you refinance, how much more quickly can you eliminate PMI? How much will you save in PMI by refinancing?
A refinance is not right for everyone, especially people who plan to move and sell the house within a few years. However, if you plan to stay put and want to gain traction paying down the principal of your mortgage so you can drop PMI, a refinance may be perfect for you.