 |
 |
 What Our Customers Have to Say |
"Everyone was prompt and clear about everything that was needed for a successful closing. Thank you so much." |
Removing Private Mortgage Insurance
The down payment
on your home can have huge effects on your
mortgage payments.
Most lenders require that you pay at least 20 percent
down, and if you do not do that then you have to take
out Private Mortgage Insurance, otherwise known as PMI.
PMI protects the lender just in case you default on
the payments.
You must pay the premium, but once you have paid a certain
portion of the mortgage off, you can usually have your
private mortgage insurance removed.
The article, “Removing Private Mortgage Insurance,”
on Bankrate.com, gives some helpful advice on cancelling
your PMI.
“Once your equity position in the home reaches
20 percent, however, you will want to stop paying mortgage
insurance (unless you have an FHA-insured loan, which
requires premium payments to the government for the
life of the loan).”
This is when it pays to be savvy about all
aspects of your mortgage, because many people do
not know when their equity would reach 20 percent.
Many people will continue to pay unnecessary PMI premiums
that they would not have to pay if only they had paid
attention. Always know your rights as well as the rules
and regulations that govern
your loan and insurance.
“By law, your lender must tell you at closing
how many years and months it will take you to pay down
your loan sufficiently to cancel mortgage insurance.
Most home buyers ask that mortgage insurance be canceled
once they pay their loan balance down to 80 percent
of their home's original appraised value. When their
balances drop to 78 percent, their mortgage servicer
is required to cancel mortgage insurance for them. Mortgage
servicers also must give borrowers an annual statement
that shows who to call for information about canceling
mortgage insurance.”
These rules and regulations do not apply to borrowers
who have bad credit and are deemed a “high risk”
by their lenders.
Those borrowers may have to pay off a larger amount
of their homes value in order to qualify for canceling
their PMI.
You can also use
refinancing to your advantage in these cases.
“With equity of 20 percent or greater, you have
a good case to rid yourself of mortgage insurance. If
you can't persuade your lender to drop mortgage insurance,
consider refinancing. If your home value has increased
enough, the new lender won't require mortgage insurance.
Make sure, however, that your refinance costs don't
exceed the money you save by eliminating mortgage insurance.”
Finally, there are a few steps you can take to rid yourself
of PMI. The author lists these three steps as, getting
a new appraisal, prepaying your loan and doing a remodel.
These three things will help to raise the value of your
home or pay off your loan even sooner.
“Some lenders will consider a new appraisal instead
of the original sales price or appraised value when
deciding if you meet the 20 percent equity threshold.
Cost of an appraisal generally runs from $300 to $500.”
“Add a room or a pool to increase your home's
market value. Then, ask the lender to recalculate your
loan-to-value ratio using the new value figure.”