Avoid Private Mortgage Insurance Costs

Homeowners who are able to afford a 20% down payment do not have to pay PMI, which costs another 0.5% to 1.0% and can tack on more money each month. Having at least 20% in equity shows you have “more skin in the game and this usually means a better interest rate because of the lower risk of default,” said van den Brand.

“It's important to remember that the costs of a loan are closely associated to how ‘risky’ it is to give the loan,” he said. “If you look like a riskier borrower, your loan will cost more.”

--Written by Ellen Chang for MainStreet

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