About Private Mortgage Insurance (PMI)

Will You Need PMI?

private mortgage insurance
Private Mortgage Insurance (PMI) is required for all home buyers who do not have at least 20% or more for the home purchase. The monthly insurance premium will be added to your total monthly cost.

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What to Do About PMI

Summary Information

Private Mortgage Insurance (PMI) is required for all home buyers who do not have 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:
www.privatemi.com

How Much Does It Cost

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.

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loan balance PMI % Annual PMI Cost

Your Monthly Premium:

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.

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Annual PMI Cost # Months Monthly PMI Cost

When Does PMI Stop?

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 purchased 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

Here are some valuable steps:

(Please note: cancellation of PMI can vary by state and by lender terms. The information supplied below is for informational purposes only on how you might cancel PMI if you meet certain requirements. This information does not substitute information you may receive from legal or financial advisors).

Run the numbers:

Analyze your current loan payment schedule:
download FREE this loan amortization schedule worksheet

Check home values within an area:
tools: link to our home valuation section

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 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:
www.privatemi.com
Comply with the instructions sent out by the lender.