HOME EQUITY LOANS/SECOND MORTGAGES Home Equity Loans (HELOCS) serve a number or purposes.  They are often used by home owners as a line of credit.  Either to have cash available should they need cash for some reason or to payoff any form of debt the home owner may have at the time. Lately, home buyers have been using HELOCS as second mortgages to avoid PMI.  When buying a house the home buyer takes a first mortgage to 80% of the value of the home and uses a HELOC as a second mortgage for the remaining 5%, 10% or 20 % of the value of the home they are buying. This eliminates the need for PMI and the interest of the HELOC is tax deductible just as the interest on the first mortgage.  The payment on the HELOC is usually an interest only payment thus giving the home buyer a lower payment that is more affordable.  Making a payment that exceeds the required low interest only payment is deducted from the principle and thus lowers the HELOC original balance.  Home buyers like HELOCS for the tax deductibility and the payment is usually the same or lower that the monthly payment (premium) of PMI. It is often more difficult to qualify for a HELOC than PMI as it requires a better credit history.  When looking for homes for sale consider a HELOC as an option.  It is another beneficial real estate option.  Your Realtor or real estate agent may be able to give you some insight into HELOCS as well.  All I-MichiganRealEstate.com participating Realtors are well versed on these products and can refer you to lenders that provide them. Looking for a professional real estate agent (Realtor) is important for accessing you the representation you need.  Real estate agents shouldn’t just send you property listings.  Property listings are a vital aspect of buying a house.  It is equally important in the home buying process to have professional representation in financing the home you are buying.

PRIVATE MORTGAGE INSURANCE (PMI) Not everyone understands what PMI actually is but it seems everyone would like to avoid it if possible.  Historically, banks would only lend home buyers a maximum of 80 percent of the value of the home they were buying.  Let’s use a simple example of a home buyer buying a house that will cost $100,000.00.   Historically, the bank, a savings and loan or thrift institution would give the home buyer a mortgage for $80,000.00 and the home buyer would have to have a down payment of $20,000.00.  The banks felt that lending over 80 percent to home buyers was too risky and actually they still feel that way today.  This obviously limited the amount of people who could buy a house.   In the 1970’s insurance companies developed a product called private mortgage insurance and thus PMI companies were created.  The PMI Company offers and sells this insurance to those home buyers with less than a 20% down payment.  The bank actually takes on a percentage of the risk from the bank promising to compensate the bank should the borrower default on the mortgage.  It is good for home owners, good for banks and good for the PMI companies.  In fact today, because of PMI companies there are many home buyers who can finance up to 100% of the cost of the home.  PMI truly helps people trying to buy a house but have no or little money for a down payment.  PMI costs nothing upfront but adds the monthly premium to the mortgage payment.  The PMI payment can be eliminated when the home buyer can show that the equity in the home has reached an 80% level.  PMI is not tax deductible.

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I-MichiganRealEstate.com is a wholly owned subsidiary of I-MichiganRealEstate.com, L.L.C. The trusted internet source for real estate exclusively located in Michigan.  Providing real estate and home selling, buying services.  Any and all participating Real Estate Agents are duly licensed Realtors® and participating member of the National Association of Realtors® and the Michigan Association of Realtors®.  Any and all participating mortgage lenders/brokers are duly licensed under the laws of the State of Michigan.  I-MichiganRealEstate’s service is dedicated home buyers and sellers and helping them to locate homes throughout Michigan and the Detroit Metro Areas.  Foreclosed home buying is on an as basis with no disclosure statements provided.  I-MichiganRealEstate provides professional relocation services to house buyers relocating and purchasing homes in Michigan.  All home and property listings are provided through a local Multiple Listing Service which includes foreclosure homes, active homes, newly listed homes, vacant land, commercial real estate and other types of real estate listings.

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