Buying a home is one of the biggest (if not the biggest) purchases you'll make in your lifetime. Most likely, you'll have to get a mortgage loan to make this large purchase. In some cases, your mortgage will come with an added cost, called PMI.
WHAT IS PMI?
Private Mortgage Insurance (PMI) is a type of insurance you are required to pay on a mortgage loan if you do not meet the required loan-to-value ratio for the type of loan you have. PMI protects the lender if you stop making your payments and default on your loan.
HOW DO I KNOW IF I HAVE PMI?
If you have a conventional, USDA, or FHA loan, you might have PMI. Here's the breakdown:
If you have a conventional loan and did not put 20% down on your mortgage loan, or have not built up 20% equity in your home, you have PMI.
You have PMI if you have a USDA loan.
You may have PMI if you have an FHA loan. Your closing disclosure should tell you if you have PMI on your FHA loan.
If you are unsure if you have PMI, speak with your lender or contact us to have one of our expert mortgage team members take a look at your current mortgage situation.
WHEN WILL MY PMI DROP OFF?
For a conventional loan, you can request cancellation of PMI when the loan-to-value ratio of your mortgage drops to 80%. The lender is required to cancel private mortgage insurance on a conventional loan when the loan-to-value ratio drops to 78%.
USDA loans require PMI throughout the entirety of the loan. To stop paying PMI, you'll want to look into refinancing into a conventional loan.
PMI on an FHA loan automatically falls off after 11 years if you put 10% down.
HOW CAN I GET RID OF PMI QUICKER?
Refinancing is a great way to get rid of your PMI and reduce your monthly payment. If your home's value has increased since you purchased it, a new appraised value could help remove the PMI completely. To see if you can get rid of your PMI, and reduce your monthly payment, contact our Mortgage Team to see if we can help.