Remove Your PMI - Private Mortgage Insurance
What Is PMI?
When purchasing a home, a 20% down payment is typically the standard. PMI (Private Mortgage Insurance) protects the lender if a borrower doesn't pay on the loan and the market price of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower.
How Can a Homeowner Get Rid of PMI?
The passage of The Homeowners Protection Act of 1998, lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans.
However, by law a homeowner can request PMI be removed when the principle amount is 80% and the PMI must be dropped. So, savvy home owners can get off the hook sooner than expected.
1. Pay Attention To The Details
When obtaining the loan, the lender may have required a time limit of which you cannot remove PMI before two years. Check with the lender to see if this is the case.
2. Prepay On Your Loan
It can take several years to arrive at the point where the principal is only 80% of the original loan amount, but even $50 extra/month can mean a large drop in your loan balance over time.
Increase your home’s market value by updating kitchens, bathrooms and flooring, or adding a room or a pool. Then it’s a matter of recalculating your loan-to-value ratio using the new value figure.
4. Get An Appraisal
The toughest thing for many consumers to figure out is just when their home's equity goes over the 20% point.
An accredited, Arizona licensed real estate appraiser can definitely help.
Master Appraisal Services:
When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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