If you’re in the market for a new home, you’ve likely heard the term Private Mortgage Insurance or PMI. Do you know what it is? And more importantly, how to remove PMI from your mortgage?
We’re here to help.
What is PMI?
From Freddie Mac: For homeowners who put less than 20% down, Private Mortgage Insurance or PMI is an added insurance policy for homeowners that protects the lender if you are unable to pay your mortgage.
It is not the same thing as homeowner’s insurance. It’s a monthly fee, rolled into your mortgage payment, that’s required if you make a down payment less than 20%. While PMI is an initial added cost, it enables you to buy now and begin building equity versus waiting five to 10 years to build enough savings for a 20% down payment.
While the amount you pay for PMI can vary, you can expect to pay approximately between $30 and $70 per month for every $100,000 borrowed.
How can you remove PMI?
Private Mortgage Insurance can be removed from your mortgage under the following circumstances.
- You put down 20% (or more) when you purchase your home.
- If you plan to stay in the home for many years, ask your Loan Officer about paying for PMI upfront instead of monthly.
- PMI is automatically removed by your mortgage loan servicer when your balance reaches 78% of the original purchase price.
- Refinance your mortgage when you have 20% equity in the home and PMI will be removed.
Veterans and Active-Duty Service Members who purchase a home with a VA Loan will not be charged PMI (no matter how much money they put down).
When meeting with your Loan Officer, ask which option is best for you. They will help guide you in the right direction.
If you have additional questions about PMI, or the mortgage process in general, give us a call.