Say “Goodbye” To Your PMI

PMI (Private Mortgage Insurance) is a type of mortgage insurance you were probably required to pay for if you have a Conventional loan. PMI protects the lender (not you) in case you stop making mortgage payments) and is usually required when a borrower puts less than 20% down at closing. PMI is typically just tacked onto your mortgage payment, so you may not even be aware you’re paying it!

PMI is a pain in the butt… and, if you’ve lived in your home long enough, you probably don’t even need to be paying it! Here’s how to get it canceled:

Request it to be canceled at 20% equity

PMI applies to borrowers with less than 20% down, so once you’ve reached 20% equity you can request that it be canceled. In other words, if your loan-to-value falls to 80% or less of the original value of your home, lenders will remove PMI from your mortgage payment. There are two ways you can get to 20% equity.

1. If your home value has increased since you bought the home, or you have made substantial improvements increasing your property value.
2. Make extra payments on your mortgage so your equity increases. (I’d rather put that extra change towards my principal than PMI!)

It will automatically fall off at 22%

It’s best to be proactive and get PMI out of your life as soon as possible. But if you miss the boat on that, lenders are required by law to automatically cancel PMI once your LTV gets to 78% — meaning you have 22% equity.  

If your loan is FHA

If you originally went with an FHA loan when purchasing your home, your more likely than not will need to refinance into a conventional loan to get PMI dropped. Talk with your lender first though, there are some (few and far between) cases where they are able to drop PMI on an FHA loan.

What’s the process?

• Get an appraisal to find the current market value. Double check with your lender first, they may require specific appraisers.
• Calculate your loan-to-value ratio to see if you owe less than 80% of what you originally purchased the home for.
• Contact your lender and let them know you no longer need to be charged PMI

If you want any help or have any questions about the process, call me! 801-616-2012