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4 Ways to Eliminate Personal Mortgage Insurance (PMI)


Private mortgage insurance, also called PMI, is a type of mortgage insurance you may be paying if you have a conventional home loan. PMI is usually required if you make a down payment of less than 20 percent of your home's purchase price. This is an added annual cost of approximately 0.2 percent to 1.5 percent of your mortgage. Are there ways of eliminating PMI? Yes!


First, check with your lender to verify your loan type and whether or not you have PMI. VA loans don't include PMI and a FHA loan won't let you remove PMI. If you have the option to eliminate your PMI, here are 4 ways that you can do this:


1. Automatic or Final Termination of PMI

The mortgage lender or servicer is required to drop your PMI when one of two things happens:

  • The provider must automatically terminate PMI when your mortgage balance reaches 78 percent of the original purchase price, provided you are in good standing and haven’t missed any scheduled mortgage payments.

  • The lender or servicer is also required to stop the PMI at the halfway point of your amortization schedule.

2. Request Cancellation Once Your Mortgage Reaches 80%

Instead of waiting for automatic cancellation, you have the right to request that the servicer cancel PMI once your loan balance reaches 80 percent of the home’s original value. If you have the cash to spare, you can get there faster by making extra payments.


3. Refinance Your Home

You may consider refinancing your mortgage to save on interest costs or reduce your monthly payments. At the same time, refinancing might enable you to eliminate PMI if your new mortgage balance is below 80 percent of the home value.

For refinancing, I recommend Sharon Barney at Fairway Independent Mortgage Corporation 512-775-2558. (See more information below)


4. *** Reappraise Your Home!***

This is an option many don't think of. In a rising real estate market, your home equity could reach 20 percent ahead of the original schedule. It might be worth paying for a new appraisal. If you’ve owned the home for at least five years, and your loan balance is no more than 80 percent of the new valuation, you can ask for PMI to be cancelled. If you’ve owned the home for at least two years, your remaining mortgage balance must be no greater than 75 percent.


I would be happy to put together some information for you concerning the estimated value of your home. Give me a call at 512-659-3617.


You can learn more at bankrate.com or Google CFPB PMI Removal.

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