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About PMI

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What to Do About PMI

Private Mortgage Insurance (PMI) is required for all home buyers who cannot raise at least 20% or more for the home purchase.

Lenders will make loans at lower down payments provided that the home buyer gets Private Mortgage Insurance (PMI).

For more information about PMI: http://www.privatemi.com/

You need to check with your lender to estimate your cost percentage for PMI if your down payment is less than 20%.

Nationally, the average annual percentage is around 0.005 of your loan balance.

=
loan balance   PMI %   Annual PMI Cost

 

If PMI is required as part of your loan, the initial annual premium will be included in your closing costs.

Your subsequent premiums (1/12th of your annual premium) will be included in your monthly mortgage payments and deposited in your escrow account.

=
Annual PMI Cost   # Months   Monthly PMI Cost

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About Mortgage PMI:

Stopping PMI

If the value of your home increases due to the neighborhood or home improvements,

or if you make enough payments on your mortgage to reduce your balance to 80% of the appraised value, does PMI go away?

Answer: you can cancel your PMI when the lender can be assured that the appraised value of the home has met the 80% threshold.

But note: you must initiate the cancel order — the lender will not do it for you unless:

  • you purchase your home after July 29, 1999
  • you reach 22% of the original property value
  • in which case the lender must automatically terminate PMI
    see the FTC site for information

 

Run the numbers:

Step 1: Get Your Current Mortgage Loan Balance
analyze your current loan payment schedule. Get your mortgage loan payment history from your lender and insert the information into your desktop worksheet:

download FREE to your desktop this loan amortization schedule worksheet (Excel spread sheet)


Step 2: Estimate the Value of Your Home

start by checking home values within your neighborhood:
link to our home valuation section


Step 3: Calculate Your LTV
if the current mortgage loan balance
(divided by) the estimated value of your home is less than 80%LTV, you may be able to cancel your PMI.

Example:
Appraised home value: $150,000
Amount of Mortgage: $115,000

LTV: 76.66% ($115,000 / $150,000)

In this example, the homeowner can request the lender to cancel their PMI.

 

Contacting your lender

  • Have available your social security number, loan number, and property address.

  • Explain that you want to cancel your PMI and request that they forward you instructions.

  • Some lenders may have cancellation instructions and forms on their Internet web site.

    The lender may require certain items from you:

    a) written request for cancellation
    b) a formal appraisal or other on your home

    view sample letters: http://www.privatemi.com/
    Comply with the instructions set out by the lender.

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