Getting Rid of PMI
There are three ways to get rid of PMI and these are all strategies to get your loan to value ratio down to 80% or less:
1. This case is the easiest, you’re already at 80% and you haven’t told the lender you want it cancelled (you always do). If the amount you owe divided by the amount the home is worth is less than 0.80, call up your mortgage lender and ask that you private mortgage insurance be cancelled. You are no longer legally obligated to pay for private mortgage insurance. In fact, the lender is legally obligated to cancel it. If it is less than 0.78, the lender should’ve already cancelled it.
2. The second case is where your LTV is like 81% or 80.5%, so if you’re $500 away from reaching an 80% LTV, then you might want to consider prepaying so you can cancel PMI. By law, anytime you reach 80% LTV, you can cancel.
3. If your LTV is a lot over 80%, your next option is to get your home value changed. If you made any major renovations or if homes in your neighborhood (or comparables) have been selling for much more, you may want to consider getting your home reappraised. Usually a lender will require that you pay an appraisal fee and use their appraiser but if the value of your home comes back much larger, this could pay off in the long run. For example, if you owe $255,000 or a $300,000 home (LTV 85%) and the homes have been selling for $318,750+ then you might want to consider getting it reappraised. If your home value was increased to $318,750, then your $255,000 loan now has a LTV of 80% and you can cancel private mortgage insurance. You might want to wait until homes are selling for a little more than $318,750 (in that scenario) just in case the appraiser comes in a little low. Even if he/she comes in a little low, you can always prepay to get your loan down to 80% of the home value.
Sadly, if your LTV is very high or homes in your neighborhood haven’t appreciated a tremendous amount, you may be stuck paying private mortgage insurance for quite a while.
This entry was posted on Monday, June 19th, 2006 at 2:08 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
3 Responses to “Getting Rid of PMI”
[...] Get rid of that pesky private mortgage insurance the About PMI way. [...]
My spouse and I have paid down our $160,000 mortgage to $124,000 in the first 15 months of our 30 year mortgage. This corresponds to LTV less than 78%. We requested termination of PMI to our mortgage broker verbally and in writing. His response on our answering machine is that the “RULE” is that we must wait 24 months from the origination of the mortgage, before making the request. At that time we must purchase an appraisal and then the request will be considered.
Does the Homeowner’s Protection Act of 1998 allow this manatory 24 month waiting period? Or can this stipulation LEGALLY be written into a mortgage agreement?
If anyone can direct us to a government or other reputable website on this matter, we would greatly appreciate it. Thanks in advance!
From what I can tell, the Homeowner’s Protection Act of 1998 makes mention of a minimum time period. The mortgage insurance shouldn’t be part of a mortgage agreement because it’s merely an insurance policy on the mortgage itself (hence it being called mortgage insurance). I would request the terms for canceling PMI from your lender (the bank that holds your mortgage, not a mortgage broker) and then working from there.
Unfortunately, all the government websites I can find make no mention of a minimum time limit but I have heard of them before (from unofficial sources). Good luck!
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