How to Get Rid of PMI on Your Mortgage

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Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

How to Get Rid of PMI on Your Mortgage

 

Nearly every home buyer initially hates the "P" word --- PMI, or private mortgage insurance.  Years and years of conditioning have taught generations upon generations of first-time buyers that PMI is something to be avoided at all costs, and even though I daily go to great lengths to demonstrate this is patently untrue, even those that come to see the light about PMI and find themselves with a form of private mortgage insurance will soon arrive at their next concern:  "When can I remove the PMI from my payment?"

 

Good Housekeeping

In the spirit of efficiency, let's cover some basics first:

  1. We'll be talking about conventional PMI here, not the FHA version.  FHA insurance (MIP) does not adhere to these rules.
  2. All of our guidance here assumes that the borrower is current on payments.  If there have been delinquencies, the game could change.
  3. The Homeowners Protection Act (HoPA) of 1998 dictates that when a loan with PMI reaches a loan-to-value (LTV) of 78%, based on the original value, PMI must be canceled by the servicer.  This is known as "auto termination."
  4. We're going to base our guidance here on "agency" guidelines and that means the interpretations of Fannie Mae and Freddie Mac.  You must always get specific policy from your servicer (the company to whom you send your payments).
  5. We're limiting the scope of our conversation to one unit properties.  Multi-unit homes have different guidelines in some cases.

 

Borrower Requested Cancellation

So now that we know that the law requires your servicer to end PMI automatically when certain circumstances exist, what do you do when you realize that it could take years to get to a 78% LTV?  You've probably heard that you can request a cancellation and demonstrate to the lender that your home has increased in value due to home appreciation in your area and/or that you've done improvements to the home that have increased its value.  You basically have two options at this point:

  • Original Value.  When your loan balance reaches 80%, or is scheduled to reach 80%, of the home's original value (the price you paid for the home or the appraised value at the time you obtained the loan being refinanced), you can make a written request to have PMI removed.
  • Current Value.  This implies that an appraisal will be done to determine the current market value of the home.  When this has happened, the borrower may request a cancellation of PMI at 80% of the value assuming that the loan has a 5-year seasoning, a cancellation at 75% of the value with a seasoning of between 2 and 5 years, and a cancellation at any time if the borrower can demonstrate that improvement to the home has increased its value to 75% or less.

 

Be Like Blondie

The moral of the story here is to call me if you have PMI on your current loan and are thinking about removing it to lower your payment.  I'll help you assess if it's possible and also present alternatives where they may exist.  In some cases, a refinance is actually a better option financially, but in all cases, the review will be insightful and make you aware not only of your options today but any future thresholds you may cross that could enable your terms to become more advantageous.

 

Private eyes are watching you, 

 

 

Robert J. Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 Fax: 415-366-1590
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
 

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.

 

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood ChicagoIL 60613 - (866) 934-7283

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Tags:
fha
equity
home loan
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property value
pmi
private mortgage insurance
mip
real estate
california
mortgage
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loantovalue
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rob spinosa

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Ambassador
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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi Rob - this is good information for all of us to know. And the best thing to do is contact a professional such as yourself. 

                                                          

                                You've been featured in Bananatude!!!

Dec 12, 2018 10:55 AM #1
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Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Good suggestions for ridding yourself of the unnecessary expense of paying PMI Rob. With home values rising now is the time to explore your options.

Dec 12, 2018 05:18 PM #2
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

If I am reading this right Rob Spinosa it could take years to rid the PMI and you would be better off refinancing ?

 

Dec 15, 2018 06:58 AM #3
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Bruce Kunz
C21 Solid Gold Realty, Brick, NJ, 732-920-2100 - Howell, NJ
REALTOR®, Brick & Howell NJ Homes for Sale

Thanks for this information Rob Spinosa. It's good to know there are options. Better to keep in mind that it's always best to get advice from a professional!
Bruce.

 

Dec 15, 2018 04:20 PM #4
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Thanks for the terrific PMI education, Rob. I learned more than a few things today.

Jeff

Dec 17, 2018 10:45 PM #5
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Rob Spinosa

Vice President of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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