Private Mortgage Insurance - When can you not have one?

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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.

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PostPosted: Thu Nov 22, 2007 5:22 pm   Post subject: Private Mortgage Insurance - When can you not have one?  

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


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PostPosted: Thu Nov 22, 2007 9:54 pm   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.

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PostPosted: Fri Nov 23, 2007 5:14 am   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.??

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PostPosted: Fri Nov 23, 2007 10:21 am   Post subject:   

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



Quote:
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

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PostPosted: Fri Nov 23, 2007 11:20 am   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.



Quote:
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.
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PostPosted: Fri Nov 23, 2007 11:44 am   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) ShockedShocked I was just thinking about the equity part of it.

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PostPosted: Fri Nov 23, 2007 11:59 am   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! LaughingLaughing 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! Very Happy

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PostPosted: Sat Dec 22, 2007 7:33 pm   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.


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PostPosted: Sat Dec 22, 2007 10:15 pm   Post subject:   

Quote:
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.
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PostPosted: Mon Jan 05, 2009 6:56 am   Post subject:   

Quote:
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%)

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PostPosted: Mon Jan 05, 2009 7:54 am   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).

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PostPosted: Mon Jan 05, 2009 9:19 am   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"



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PostPosted: Mon Jan 05, 2009 2:54 pm   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.

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PostPosted: Mon Feb 09, 2009 5:29 pm   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...


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PostPosted: Mon Feb 09, 2009 6:21 pm   Post subject: how long do you have to pay pmi?  

Quote:
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.
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