Private Mortgage Insurance - When can you not have one?

Submitted by Anonymous (not verified) on Thu, 11/22/2007 - 17:22
When you buy a home with a mortgage valued at more than 80% of your home's worth, your lender would need you to have a Private Mortgage Insurance. A PMI policy covers a lender from any loss if you default as a borrower. Not just that, it also enables you or a prospective borrower to own a home even if you have insufficient cash. You can purchase a home with 3% - 5% down payment if you opt for PMI.

Do you have to buy PMI?

No. There are 2 main ways by which you can avoid PMI. Take a look at the following ways by which you can avoid paying for PMI:
  1. Paying higher interest rate on your mortgage loan may lead your lender to waiving off your PMI requirement. How much you pay as interest depends on the down payment that you make.
  2. The second option is to opt for an "80-10-10" loan. This means that there will be 2 loans and a 10% down payment. 90% of the loan amount is financed by PMI rate that is equivalent to 80% of the sale price. The final 10% of the sale price is funded by a second mortgage.

How long do you have to pay PMI?

You may continue to pay PMI till as long as your home has sufficiently appreciated in value and the mortgage amount comes to less than 80% of the value of your home. Once your mortgage value reaches less than 80% you may request your lender to drop the PMI requirement.

You may check the appraised value of your home. If the loan balance comes at 78% of the original purchase price, your PMI will be automatically dropped.

You may eliminate your PMI in as less as 2 years. You may consult your realtor to determine what would be the range for homes that have similar appreciation as yours that have been sold or closed in the last 6 months. Having done this you can pay for a bank appraisal. Remember when you buy a policy make sure you are clear about the PMI elimination option.

Related Readings

Hello,
I had taken a loan about 2 years ago and have been repaying my installments regularly. As far as I remember I am also paying the premiums for the Private Mortgage Insurance (PMI). But how long do you have to pay pmi once your loan balance gets reduced after paying 24 installments? Does anyone have any idea? Thanks

Posted: 22 Nov 2007 09:54 Post Subject:

You can google this and there is MUCH info out there on it.

Basically, once your at 80% LTV (Loan to Value) you can have PMI removed. But you need to be "current" on your loan and you might also need to pay to have an appraiser confirm the value. Once your LTV is at 78% your mortgauge will automatically drop the PMI.

After 2 years, you've probably only paid the loan down a few thousand.

Posted: 23 Nov 2007 05:14 Post Subject:

I guarantee that unless you have been paying a lot into your mortgage or if your property has significantly increased in value, thats not long enough to have pmi. You must be past the threshold of 80% loan to value, then you can request that they remove Pmi. Also you may decide to refinance it, which I do not recommend. In that case, any other type of loan, other than conventional does not have to have PMI. But please do not let that be a motivation to refi a home.

I have a brother name Anthony Allen. Are you from Tenn.??

Posted: 23 Nov 2007 10:21 Post Subject:

Good morning Anthony, see if the quoted piece of information helps you. I've got this information from a Govt. site.

For home mortgages signed on or after July 29, 1999, your PMI must - with certain exceptions - be terminated automatically when you reach 22 percent equity in your home based on the original property value, if your mortgage payments are current.



you can also check the following link for more inputs.

ftc.gov/bcp/conline/pubs/alerts/pmialrt.shtm

Thanks,
Kim

Posted: 23 Nov 2007 11:20 Post Subject:

I agreed Anthony with all the posts, just wanted to throw in here that I personally have had PMI dropped from home mortgages twice! And it was after (as posters have mentioned) I was 80% or less.

Also you may decide to refinance it, which I do not recommend.

I don't know if this is good or bad advise. It would depend on the rate you have now and the rate you may be able to get. If you can save 1 percent, then maybe worth the refi. this is completely situational.

Posted: 23 Nov 2007 11:44 Post Subject:

True Lori.........That was a little one sided what I said about the refi. Some cases would be beneficial. (I'll try to stay on topic) :shock: :shock: I was just thinking about the equity part of it.

Posted: 23 Nov 2007 11:59 Post Subject:

I wasn't concerned about the topic, actually think this was still on topic just didn't know where the adament do not recom. came from, and thought well, if this OP is paying 10% then dude needs to refi! :lol: :lol: I understand what you mean about the equity, though....I'm doubtful for our OP that he will be able to request PMI removal for some time. In his case though, if he paid low for the house, perhaps he could refi, for less than 80% of value of property thus beat PMI all together! :D

Posted: 22 Dec 2007 07:33 Post Subject:

I refinanced after owning my house for 2 years. The new appraisal came back several thousand higher than the original appraisal. Thus, I no longer had to pay PMI.

Posted: 22 Dec 2007 10:15 Post Subject:

I refinanced after owning my house for 2 years. The new appraisal came back several thousand higher than the original appraisal. Thus, I no longer had to pay PMI.

Eliminating PMI is based on LTV, Loan to Value. That is, your _loan_ needs to be no more then 80% of the value. If a person is paying $1000 in a 30 year loan, about $200 is going toward the loan. Paying 2 years on the loan would lower the loan by about $4800. About the only way one could eliminate PMI in such a short time is if the value of the home was either much higher then what they paid and/or the value took a serious hike in a short amount of time. Both of which are very possible. I'm just pointing out that you need to look at the _loan_ amount as compared to the value.

Posted: 05 Jan 2009 06:56 Post Subject:

Once your LTV is at 78% your mortgauge will automatically drop the PMI.


Does it really drop PMI automatically?
Or is it different for some states? (Just need to be sure if we'd need to inform someone that the LTV has reached 78%)

Posted: 05 Jan 2009 07:54 Post Subject:

I think you can reqest that it be dropped at 80% but you need to request it and certain criteria need to be met. Otherwise, yes... it's automatic at 78% (I think as long as your not past due on payments).

Posted: 05 Jan 2009 09:19 Post Subject:

I was required to pay for an appraisal in order to get the PMI dropped from my loan. It was not automatic. Read your loan document to see if there are any special requirements. The HUD PMI Act Information is located here: "http://www.hud.gov/offices/hsg/sfh/res/respapmi.cfm"

Posted: 05 Jan 2009 02:54 Post Subject: how long do you have to pay pmi

You need an apprasial to have it removed prior to the loan being at 78% of the value (that is, to show that the property value is at 78% of the loan). But once the loan itself is at 78%, they are required to remove the PMI w/o one.

There are 2 things mentioned on the page you linked to and not much more. They are as follows:

The law provides 2 situations in which borrower paid PMI may be cancel - it can be automatic or by request. Lender-paid PMI is excluded from these mandates, but requires an up front disclosure to the borrower about lender-paid PMI.

The 2 cancellation situations are:

Automatic. In general, when the homeowner's equity position reaches 22 percent of the original value of the property, the mortgage servicer must automatically cancel the PMI. The borrower must be current in making payments for automatic cancellation to apply.

By Request. Homeowners can request cancellation of the PMI when their equity position reaches 20 percent of the original value of the property, if they meet certain criteria. CONTACT YOUR MORTGAGE LENDER FOR ITS CRITERIA LIST.

But I also had that backwards... at 80%, a person can request that it be removed and at 78% it's required that it be removed. The only requirement is that the payments be up to day. I think this means current and no more then 2 late payment within a certain amount of time.

Posted: 09 Feb 2009 05:29 Post Subject: What about current values?

Is there a way to factor in the current home value vs the original home value?? I am easily under 80% if you factor in the $70k value reduction the current economy has presented...

Posted: 09 Feb 2009 06:21 Post Subject: how long do you have to pay pmi?

Is there a way to factor in the current home value vs the original home value??

You need to contact your mortgage holder and find out from them what they require. From what I understand, most likely they will require that you obtain a current appraisal on the home.

Posted: 10 Feb 2009 06:47 Post Subject:

if you can google for your mortgage then surely you will find some good mortgage calculators (which gives results in excel sheets) so you won't find difficulty in finding a good deal for your query. :lol: :lol:

Posted: 23 Feb 2009 04:24 Post Subject: pmi

how much does the appraisal have to be (typically) to drop the pmi? if i bought my house for 55k (short-sale) and have rennovated the bathrooms (which were almost unusable) and the kitchen (origonal from late 50's) and new paint and carpet, the value of the house should be a lot higher. what would the house have to appraise for (approximately) to drop the pmi? if its all in the loan docs, what normal?

thanks,

Matt

Posted: 23 Feb 2009 07:36 Post Subject:

how much does the appraisal have to be (typically) to drop the pmi?

This info was posted in the beginning of the thread. It's not what the house was bought for... it's the percentage of the amount owed on the loan to value (LTV). You can call your mortgage company and ask them what you home needs to be valued at to have PMI removed.

Posted: 27 Jan 2010 12:51 Post Subject:

I have paid my mortgage down to 78% with extra payments and it has not been automatically removed. The bank has charged me for PMI going on two months now since it was paid down.

In addition, their site says for removing PMI automatically it will be done when it is "scheduled to go to 78% according to their amortization schedule" not when it actually reaches 78%. As their own site shows my LTV less than 78% right now.

Posted: 27 Jan 2010 02:08 Post Subject:

Thought this may be helpful. Looks like this is a lot different than everything else I have read online.

The "cancellation date" under the automatic termination provision is defined as the date when the loan is "first scheduled to reach 78 percent of the original value of the property securing the loan." The optional "cancellation date" occurs when the amortization schedule requires the loan balance to be "80 percent of the original value of the property securing the loan" -- or sooner, if a borrower has made extra payments to reach the 80 percent level.

Posted: 27 Jan 2010 11:13 Post Subject:

I've personally had PMI removed from three different homes/mortgages, in my life the very second the balance reached 80%..Not one time did they do it automatically, and without me calling to raise a little well..you get the point...and it was removed immediately after my call...so many people waste so much money, not staying on top of this.

Posted: 28 Jan 2010 05:17 Post Subject:

Yes,

And I would have done the same thing had I known that it would not be automatically canceled at 78% (every place on the internet has it automatically canceled at 78% - not really true).

On top of this, I'm having trouble even finding the Dept that handles the law.

It's hard to believe the confusion over a 10 year old law.

Posted: 24 Oct 2011 03:40 Post Subject: PMI Tenant

Hello, we have been paying into PMI since 6 years (below 78%). Each time we are getting different information from our mortgage holder. They wanted us to get an appraiser through them that we have to pay for.
The newest information from them, WE CAN NOT GET RID OF PMI BECAUSE WE ARE NOT PHYSICALLY LIVING AT THAT PROPERTY. We are a military family and got stationed in a different state.

Are they allowed to do that? I am so furious. Thanks in advance

Posted: 25 Oct 2011 07:30 Post Subject:

As far as I know they can't do that if you are making your payments on time.

Consult a finance adviser to know if your lien holder is allowed to do that. If your lienholder is not allowed to do this then write firm but polite letters to them providing documents supporting your cause.

If this doesn't work then you may need to take this issue to the small claims court and you won't need a lawyer. Just consult a financial advisor and get the doubts cleared before taking any action.

Posted: 20 Dec 2011 03:52 Post Subject:

Banks usually asks for the PMI and even they make it mandate some time for the borrower, these ideas are very alluring and nice to consider before applying for the loan.

(Link removed as per TOU)

Posted: 26 Dec 2011 05:56 Post Subject:

Really good information shared by you.
It will really help all those members out here who are finding difficulties in getting mortgage loan at low interest rate..!!

(Link removed as per TOU)

Posted: 07 Feb 2012 07:58 Post Subject: Avoid PMI

With buying a home, if the appraisal shows the home valued 20% higher than the loan amount, do you still have to carry a PMI & how is it calculated

Posted: 07 Feb 2012 10:38 Post Subject:

Carrying PMI on your loan depends on how much down payment you made on the property. Use a calculator to find out more. You can find dozens online.

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