| What is PMI? Private mortgage insurance is a monthly fee you pay when you put less than 20 percent down on a conventional loan. It protects the lender, not you. It typically costs between 0.3 and 1.5 percent of your loan amount per year, and the good news is it is temporary. Let me clear up the biggest myth in mortgages first. You do not need 20 percent down to buy a home. That myth keeps renters renting for years longer than they need to. PMI is simply the price of getting in the door sooner, and getting in sooner usually wins, because you start building equity now instead of later. What it costs in real numbers. On a $250,000 loan with good credit, PMI might run $80 to $150 a month. Your credit score and down payment size drive the price. Better credit, cheaper PMI. Now, how do you get rid of it? Three ways. One, automatic removal. By law, PMI drops off when your loan balance reaches 78 percent of the original home value. You do not have to do anything. Two, request removal at 80 percent. Pay your balance down to 80 percent of the original value and you can ask your servicer to remove it early. Three, the one nobody tells you about. If your home has gone up in value, you may be able to remove PMI based on the new value, either through your servicer with a new appraisal or by refinancing. With how much Cleveland County values have climbed the past few years, a lot of local homeowners are paying PMI they no longer need. One more note. FHA loans have their own version, and on most FHA loans it never drops off. Refinancing into a conventional loan is usually the only way out. Think you might be paying PMI for nothing? Call us at [PHONE]. Five minutes and we can tell you if it can come off. That is a raise you give yourself. |
