PMI  (private mortgage insurance), is usually required by lenders if you do not put down, at least, 20%. If you get a loan which requires a lower down payment, you will probably be required to add this coverage in. What does PMI do? It products the lender in case you default on your note. It does not protect the borrower, but it protects the lender. Do I need to write that again? PMI protects the lender in case you default on your mortgage.

Why Avoid PMI?

This may seem like a small price to pay if you do not have a twenty percent down payment. In fact, it may be the best – or only – option for some buyers. However, in these days of mortgage problems, you may want to take at some reasons to avoid this coverage if you can.

Cost of PMI

This coverage usually costs about 1% of the loan value every single year. If you have a $200,000 loan, you are paying $2,000 a year to protect your mortgage company. That is very generous of you. But if you feel the need to donate money, I can suggest several charities like the We are The World for Haiti or a local food bank.

So here you are, paying about $160 a month for mortgage company protection, and this money is not adding to your equity or the asset value of your home.

Taxes

One major benefit that many homeowners take advantage of is the ability to deduct their mortgage interest. Your PMI premiums may not be deductible at all. The rules state that you must make less than a certain threshold to benefit from this deduction. Since tax rules change all of the time, I am not going to post the income levels. It should be easy enough to look it up on IRS.gov.

Your Family Does Not Benefit

When you think of insurance, you probably think about protection your family or finances. The lender, not you, is the beneficiary on this type of coverage.

Lost Money

We covered this a little above, but you understand you will probably have to pay your PMI untill you manage to have a 20% equity stake in your home! But this added expense will probably mean that you will not arrive at that goal for more years. You are probably trying to set your monthly payment at an affordable rate, and the cost of this coverage will increase your bill.

Does Not Always Automatically Cancel

You may have to draft a letter, or even get a formal home appraisal, before you can cancel this when you do have a 20% equity stake in your home. This all takes more time and money.

Is PMI All Bad?

Lots of people pay for this coverage, and there are some valid reasons. As we stated above, this may be the only way to qualify for a loan. Purchasing a home makes sense for your family even if you do not have a 20% down payment, so you accept the added cost. Many families can deduct the premiums, so the total cost will be less if you count the deduction.

So we are not saying that this product is always a deal killer, but we just want you to be aware what you are purchasing before you commit.

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We get a lot of requests for a homeowners insurance calculator. We have split those requests into two general questions people want to figure out.

• How Much Homeowners Insurance is Needed to Cover a House?
• How Much Does Homeowners Insurance Cost?

These are two different questions, and the answers will vary by your neighborhood, the costs in your area, and many other individual factors. However, we do believe we can help you figure this out! Of course, you can also find an isurance agent to give you more information.

Most homeowners insurance calculator forms online give such general estimates that they will not be accurate for your particular zip code, home type, etc. You could visit here: free homeowners insurance rate calculator.

How Much Homeowners Insurance Do You Need?

Most of our claims, we hope, are for minor things. We hope we never have so much damage that we have to rebuild our homes. But this is the worst case that has to be considered! And you need to think about how much it will cost to rebuild your home, and not how much it would take to simply buy another home that has already been built.

This figure may be very different from the cost you actually paid to buy your home. If you purchased an older home, it may have cost much less than the actual rebuilding costs. In some cases, though, if the value of land is expensive where you live, your rebuilding costs will be less than your purchase price. After all, even if you had land damage, you should still have your lot even if it needs to be cleaned up. So how can you find an accurate answer so you know you have the proper coverage for your home?

Price Per Square Foot – You should be able to contact a realtor, or look online, to find the average price per square foot to build a home in your general area. In fact, you will probably want to compare a few answers. If you own an older home without a lot of extras, you may be able to use a minimum dollar value. If your home has lots of upgrades and features, and you want to be able to replace them, you will probably need to take a higher number.

Low, Medium, or High?

So let’s look at a 2,000 square foot home in a middle class neighborhood. Let’s say you came up with 3 figures, a low, medium, and high, to rebuild a home. These numbers are $82, $107, and $139 as the price per square foot to rebuild (or build) a home. The low number would represent a basic area home while the high number would represent a home with lots of upgrades and features.

All we have to do is multiple these numbers by the square feet of the home. So we come up with $164,000, $214,000, and $278,000 as our low, medium, and high coverage estimates. Now you have to make some decisions that no homeowners calculator can really help you with. You may be required to have a minimum amount of coverage by the terms of your lease as well.

How Much Will Homeowners Isurance Cost?

Once you have decided how much coverage you need, it is time to start comparing premiums. These days, it is fairly simple to compare home insurance rates with online quote forms. These allow you to enter your basic information once, and then sit back while competitive plans are returned to you.

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I wonder if all of the new stimulus bill homeowners considered the cost of coverage when they calculated their monthly expenses. I know that attractive mortgage payments are usually jacked up by as much as 1/3 when taxes and insurance premiums are added in as part of a monthly bill to pay. This article got me thinking about it: first time homeowners insurance policies. Add the new cost of insuring a house to existing auto, health , and life bills, and it can feel as if a large chunk of money goes to some insurance company every month!

Tips to Lower Homeowners Insurance Rates

If you are struggling with your bills, or even if you would just like to shave some of them so you can save more money every month, it may be time to analyze your policy. Besides, experts tell us we should evaluate all of our coverage every year or so. Our circumstances change, and so does the market from which we purchase policies.

Shop Around – Understand that insurance policies are local. Not all companies do business in every state, county, or zip code. Furthermore, rates are also set by local area. I am fairly sure that it would cost more to buy the same type of coverage for a 2,500 square foot home in the New York City metro area than it would in a rural area a few hundred miles away. In fact, it would probably cost less to buy the same coverage in a suburban area a few dozen miles away. To further complicate matters, every insurer has their own rate tables and discounts. Explore the market.

Save Time and Money - Use online quote forms that will deliver competitive and accurate quotes for your own situation. We like this one because it is free, simple, and safe (BBB participant): Best Homeowners Insurance Rate Quotes.  You simply enter your specific information once, and you will get a variety of choices. You can choose to see companies online, get emailed quotes, or speak with a qualified local agent.

Consider The Type of Coverage you need – A family that lives in the house they cover will have different needs than a tentant or renter.

Look for Discounts – Combining different types of coverage, say home and auto insurance discounts, may save you money. This is because it saves the insurer money, and they want to capture as much of your business as possible.

Don’t be Penny Wise and Pound Foolish – What does that mean? Well, it means that you should not try to save a few dollars a month by going with an insurer who is not going to back you up when you need to make a claim.  Run your quotes with the best homeowners insurance companies so you will be satisfied with their service when you need it.

Loyalty is great, but your current company may not offer the best plans and prices in the current market. It is a good idea to evaluate your policy every year or so. If you are satisfied with your current plan, then keep it. But you may find a better deal out there.

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