Do you have private mortgage insurance on your mortgage? If you have a conventional loan and you put less than 20% down when you bought, you probably have mortgage insurance (PMI). The good news is that you can eventually get rid of PMI.
PMI is a form of insurance that is designed to protect the lender in case of default. The amount of PMI that you pay depends on the loan to value and your credit scores. Sometimes even the area you are buying in can affect your PMI.
So how do you get rid of it? There are four ways to remove PMI:
- Making payments on your loan until PMI automatically cancels
- Asking for removal when your equity is 20% or higher
- Make a large principal reduction to reduce your loan balance to 80% and ask for removal
- Getting a new appraisal to show your home has increased in value
This only works on conventional loans. FHA requires mortgage insurance for the life of the loan unless you put more than 10% down and pay on it for 11 years. VA loans have a funding fee but not a monthly fee. USDA loans have a guarantee fee that is both an upfront fee and monthly.
If you aren’t sure about the type of loan or if you have enough equity to remove PMI, talk to your loan officer or realtor. We can help you figure out the value of your home so you know if it’s worth asking for an appraisal to remove PMI.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
