PMI - Private Mortgage Insurance
| What is PMI | The Cost of PMI | Getting Rid of PMI | PMI Links |
Getting rid of your PMI can save you thousands of dollars in the long term and as much as $100 a month on your
monthly mortgage payment.
What is PMI?  Top
PMI, or Private mortgage insurance, is insurance that protects a lender or investor against loss if a borrower
stops making mortgage payments. It is usually required for loans in which the down payment is less than 20
percent of the sales price. PMI makes it possible for people to buy a house with a down payment as little as
3 percent.
If you have an FHA mortgage, you have what is called MIP, or Mortgage Insurance Premium. This is similar to PMI,
but not the same.
If you put a 20% or more down payment on your loan, you have avoided both PMI and MIP.
If you have PMI, you should be getting an annual written statement with information about requesting cancellation
as well as an address and phone number of who to contact about cancellation.
The Cost of PMI? Top
PMI payments are typically part of your monthly mortgage payment. The amount varies, but for a $200,000 home, you
could be paying as much as $80 a month for PMI.
EXAMPLE
Original Home Value: $200,000
Mortgage Amount: $194,000
Amortization Period: 30 Years
Annual Interest Rate: 5.75%
PMI cost: $80 a month
Automatic termination for PMI on this loan will be reached 11 years and 2 months, or after 134 PMI payments.
At $80 a payment, that will cost $10,720.
Do not wait for the automatic termination. Because home values increase, you may be able to get rid of your PMI much
earlier than the automatic termination date.
What if you could drop your PMI after 4 years? From the example above, that would be a cancellation after 48 payments
or $3,840. That would be a savings of $6,880.
Getting Rid of PMI Top
Many lenders will consider dropping the PMI when you have 20% equity built up in your home, if you are a
borrower with a good payment history and there is no second mortgage on the property.
A good payment history means that you have not been 30 days late with your mortgage payment within a year of your
request, or 60 days late within two years. Your lender may require evidence that the value of the property has not
declined below its original value, an appraisal, and that the property does not have a second mortgage, such as a home
equity loan. If you are thinking of taking out a second mortgage, it may be worth waiting until after you have dropped
PMI insurance.
While the law does not require a lender to consider the current property value, many are willing to do so. Contact
your lender, or the servicer of your mortgage, to request specific information on their requirements. If they will
consider removing the PMI insurance early, they will supply you the details on what exactly you need to do in order
to get rid of your PMI.
PMI Links Top
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