Private Mortgage Insurance - When can you not have one?

by Guest » Thu Nov 22, 2007 05:22 pm
Guest

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

Total Comments: 96

Posted: Thu Jan 28, 2010 05:17 pm 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: Mon Oct 24, 2011 03:40 pm 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: Tue Oct 25, 2011 07:30 am 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: Tue Dec 20, 2011 03:52 pm 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.

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Posted: Mon Dec 26, 2011 05:56 pm 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..!!

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Posted: Tue Feb 07, 2012 07:58 am 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: Tue Feb 07, 2012 10:38 am 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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