GETTING RID OF PMI...
One way to put more money back into your wallet!
What is PMI/MIP and why should you get rid of it?
PMI/MIP is “Private Mortgage Insurance” or as I like to refer to it, “a necessary evil to put less money down on a home”. Take a look at two standard loan types below that require PMI/MIP and how you can get rid of this “necessary evil”.
Conventional Loans:
Conventional loans require PMI. However, once you pay down your balance so that you have 20% equity, you have the right to request your PMI to be canceled. Or you can pay down your balance until you have 22% equity and have your PMI automatically cancel.
How do you determine when you will reach 20% equity? It’s simple! Take your original purchase price and multiply it by 80%. That number is the balance you need to pay your loan down to in order to eliminate mortgage insurance from your monthly payment. At your closing, you were given an amortization schedule. On the amortization schedule, find the month where your balance will fall below the above calculated figure and then you will know when your PMI can be canceled. If you wish to pay more towards your principal, keep an eye on your balance, as you will reach this point sooner than you may think.
FHA Loans:
FHA loans require MIP (FHA version of PMI). MIP goes away when you get to 22% equity in your home or 78% Loan to Value. The minimum amount of years required to have MIP for an FHA loan is 5 years. If you purchased your home after April 2013, the PMI will remain for the lifetime of your loan. In this case, consider refinancing into a Conventional loan to get rid of PMI.
Other ways to get rid of PMI:
1. Do significant improvements to your home. Most lenders will allow you to go through a re-appraisal process and have PMI canceled if your home has increased in value.
2. Refinance out of the current loan and get into a better loan product with no PMI.
Give me a call to eliminate PMI/MIP from your monthly mortgage payment!
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