“What is PMI, and how does it work?”

Unless you put 20% down on your home when you bought it, you might likely have a loan that requires PMI (private mortgage insurance). PMI protects the lender if you stop making your house payments. Basically, they add a PMI payment to your monthly mortgage payment.

THE GOOD NEWS!
For most people PMI doesn’t last for the entire life of the loan. The lender is required by federal law to drop the PMI from your mortgage payment when your loan balance is paid down to 78% of the original purchase price of the home, but you can request that they remove it once your loan balance is paid down to 80%. This date should have been given to you in your original loan documents. If you cannot find it, contact your lender. (Some restrictions apply)

EVEN BETTER NEWS!
Fannie Mae and Freddie Mac’s rules are more favorable because they are based on current appraised value rather than the value of the home at the time the loan was made! Which means you might already qualify to request the removal of your PMI!

Requirements to Remove PMI…

· Your loan must mature for at least 2 years.

· You can terminate after 2 years if your loan balance is no more than 75% of current appraised value.

o Example: If your loan balance is $150,000 then you need to show your lender a current appraisal of $200,000 or more.

· After 5 years it is even easier because the loan balance ratio raises to 80% of current appraised value.

o Example: If your loan balance is $150,000 then you need to show your lender a current appraisal of $187,500 or more.

· You must request cancellation, and obtain an appraisal acceptable to the agencies and lender.

· No 30 day late payments within the past year, and no 60 day late payments in the year before that.

· The ratios are lower for investment, second mortgages or multi-family properties.

· FHA loans cannot remove PMI.

 "OK, I'm Set! How Do I Get Started With Removing My PMI?"

You need to send a cancellation request letter and a current appraisal to your mortgage servicer. Your mortgage servicer is the company to which you make your mortgage payments.

CONTACT US!

We have a few different Sample Letters to choose from. Also you need to order an appraisal. Click the Client Login link to login and order an appraisal.

An appraisal for a typical home is $350, but that price can go up if your home is particularly large, or if your home has extra features like a pool, more than 1 acre of land or other features. If you need a quote for your home appraisal, please call us today!

Once you have ordered your appraisal the appraiser will contact you within 24 hours to schedule an inspection of your home. Once an appraiser inspects your home the appraisal will usually be returned to you within 1 – 3 days.

But How Much Is My PMI Really Costing Me?

PMI typically costs between 0.5% and 1% of the entire loan amount ON AN ANNUAL BASIS. This means if you owe $200,000 on your home you could be paying upwards of $2,000 or more EVERY YEAR! We can help you never pay a PMI payment again!

Send your cancellation request letter and completed appraisal to your mortgage servicer. You will need to plan on following up with your lender until you are notified that your mortgage insurance has been canceled. If your loan isn’t held by Fannie Mae or Freddie Mac, ask the lender for a written statement of its own termination policy. As always, we will be here to help!

For more information on PMI and the Homeowners Protection Act, try one of these links:

Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

Private Mortgage Insurance (PMI): Law Requires Lenders to Cancel PMI