Friday, 06 September 2013 11:47

Private Mortgage Insurance and Deflation of U.S. Currency

Written by  Dave Ramsey
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Q. When is it okay to purchase a house without making a 20 percent down payment?

 

A. When you’re willing to pay private mortgage insurance (PMI). And that’s not something you want to do.

 

PMI costs about $75 a month per $100,000 borrowed. So, if you borrow $200,000 on a home, and you don’t put down at least 20 percent on the transaction, you’ll have to pay out an extra $150 a month as part of your mortgage payment.

 

Private mortgage insurance does nothing for you except pay your mortgage company in the event they have to foreclose on you and they lose money. PMI is foreclosure insurance that protects the lender, and you get to pay for it if you don’t make a 20 percent down payment. In the scenario I mentioned before, that would be an additional $1,800 a year on a $200,000 loan. In a sense, that’s an extra 0.9 percent on your interest rate. That’s what it feels like.

 

So you can see that PMI is not a positive thing. Often, a first-time homebuyer will purchase a house with 10 percent down then pay the other 10 percent as quickly as possible in order to get rid of the PMI. Stay away from it. It’s nasty stuff!

 

 

Q. What do you think about predictions of a major deflation of U.S. currency?

 

A. I think woven into your question is another question: What do I think about the predictions of our economy completely collapsing? The truth is I don’t believe for one second that our economy is going to completely collapse. Do we have some serious problems that should be addressed? Yes. Do we have politicians who are stupid and who don’t want to address these problems? Absolutely. But does that mean the world is coming to an end? Of course not!

 

It does mean, however, that you and I need to demand that the people in Washington stop playing games and do their jobs. This ridiculous spending spree we’ve been on for years has to stop. Government spending on all levels—national, state and local—is ridiculously out of control.

 

I’ve heard end-of-the-world predictions most of my life. But the truth is, we’re not going to see anything of that magnitude until Jesus comes back. No, I’m not going to predict or believe that the U.S. currency is going to collapse. Don’t spend all of your time and energy worrying about conspiracy theories and doomsday scenarios. Spend it living life!

 

 

 

 

Last modified on Friday, 06 September 2013 11:48
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