Not many of us are fortunate to have a saving that will help us to put 20% down payment while purchasing a home in the area. Many of my home buyers in the Northern Virginia area have secured loans that have Mortgage Insurance Premium or PMI commonly known as.
People ask our lenders frequently "How to get rid of PMI?"
The easiest way is to refinance if you don't have enough equity, but for those who do, here's the basic rules on it.
Cancellation based on original value:
You can ask your lender to cancel your mortgage insurance when your mortgage reaches 80% of your home's original value, either because:
- You've made all of your scheduled payments or
- You've made extra payments to reduce your principal balance ahead of schedule
Cancellation based on current value:
You can also ask your lender to cancel mortgage insurance based on the equity due to your home value appreciating.
- If your mortgage is at least 2 years old but less than 5, you generally need at least 25% equity in your home.
- If your mortgage is over 5 years old, you generally need at least 20% equity.
- Lenders will require an appraisal in most cases.
Automatic cancellation - no asking required!
Your lender must cancel your mortgage insurance on your loan - with certain exceptions - when:
- You reach 22% equity in your home based on the original property value and
- Your mortgage payments are current.
Government loans, like FHA and VA loans have different rules than the above. Speak with your mortgage lender or contact a local loan officer in the Northern Virginia area to learn how to cancel PMI.
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