by Guest » Thu Nov 22, 2007 05:22 pm
When you buy a home with a mortgage valued at more than 80% of your home's worth, your lender would need you to have a Private Mortgage Insurance. A PMI policy covers a lender from any loss if you default as a borrower. Not just that, it also enables you or a prospective borrower to own a home even if you have insufficient cash. You can purchase a home with 3% - 5% down payment if you opt for PMI.
Do you have to buy PMI?
No. There are 2 main ways by which you can avoid PMI. Take a look at the following ways by which you can avoid paying for PMI:
- Paying higher interest rate on your mortgage loan may lead your lender to waiving off your PMI requirement. How much you pay as interest depends on the down payment that you make.
- The second option is to opt for an "80-10-10" loan. This means that there will be 2 loans and a 10% down payment. 90% of the loan amount is financed by PMI rate that is equivalent to 80% of the sale price. The final 10% of the sale price is funded by a second mortgage.
How long do you have to pay PMI?
You may continue to pay PMI till as long as your home has sufficiently appreciated in value and the mortgage amount comes to less than 80% of the value of your home. Once your mortgage value reaches less than 80% you may request your lender to drop the PMI requirement.
You may check the appraised value of your home. If the loan balance comes at 78% of the original purchase price, your PMI will be automatically dropped.
You may eliminate your PMI in as less as 2 years. You may consult your realtor to determine what would be the range for homes that have similar appreciation as yours that have been sold or closed in the last 6 months. Having done this you can pay for a bank appraisal. Remember when you buy a policy make sure you are clear about the PMI elimination option.
You may check the appraised value of your home. If the loan balance comes at 78% of the original purchase price, your PMI will be automatically dropped.
You may eliminate your PMI in as less as 2 years. You may consult your realtor to determine what would be the range for homes that have similar appreciation as yours that have been sold or closed in the last 6 months. Having done this you can pay for a bank appraisal. Remember when you buy a policy make sure you are clear about the PMI elimination option.
Related Readings
- About PMI
- Can the PMI provider sue home owner?
- PMI after death of the insured
- Recovering PMI paid ahead
- New legislation and PMI
- PMI refund
- PMI during foreclosure
- How does PMI protect?
- Can you cancel PMI in 2 years?
- What are your rights with PMI?
- When can you cancel private mortgage insurance?
Hello,
I had taken a loan about 2 years ago and have been repaying my installments regularly. As far as I remember I am also paying the premiums for the Private Mortgage Insurance (PMI). But how long do you have to pay pmi once your loan balance gets reduced after paying 24 installments? Does anyone have any idea? Thanks
I had taken a loan about 2 years ago and have been repaying my installments regularly. As far as I remember I am also paying the premiums for the Private Mortgage Insurance (PMI). But how long do you have to pay pmi once your loan balance gets reduced after paying 24 installments? Does anyone have any idea? Thanks
Posted: Mon Jan 05, 2009 09:19 am Post Subject:
I was required to pay for an appraisal in order to get the PMI dropped from my loan. It was not automatic. Read your loan document to see if there are any special requirements. The HUD PMI Act Information is located here: "http://www.hud.gov/offices/hsg/sfh/res/respapmi.cfm"
Posted: Mon Jan 05, 2009 02:54 pm Post Subject: how long do you have to pay pmi
You need an apprasial to have it removed prior to the loan being at 78% of the value (that is, to show that the property value is at 78% of the loan). But once the loan itself is at 78%, they are required to remove the PMI w/o one.
There are 2 things mentioned on the page you linked to and not much more. They are as follows:
The law provides 2 situations in which borrower paid PMI may be cancel - it can be automatic or by request. Lender-paid PMI is excluded from these mandates, but requires an up front disclosure to the borrower about lender-paid PMI.
The 2 cancellation situations are:
Automatic. In general, when the homeowner's equity position reaches 22 percent of the original value of the property, the mortgage servicer must automatically cancel the PMI. The borrower must be current in making payments for automatic cancellation to apply.
By Request. Homeowners can request cancellation of the PMI when their equity position reaches 20 percent of the original value of the property, if they meet certain criteria. CONTACT YOUR MORTGAGE LENDER FOR ITS CRITERIA LIST.
But I also had that backwards... at 80%, a person can request that it be removed and at 78% it's required that it be removed. The only requirement is that the payments be up to day. I think this means current and no more then 2 late payment within a certain amount of time.
Posted: Mon Feb 09, 2009 05:29 pm Post Subject: What about current values?
Is there a way to factor in the current home value vs the original home value?? I am easily under 80% if you factor in the $70k value reduction the current economy has presented...
Posted: Mon Feb 09, 2009 06:21 pm Post Subject: how long do you have to pay pmi?
Is there a way to factor in the current home value vs the original home value??
You need to contact your mortgage holder and find out from them what they require. From what I understand, most likely they will require that you obtain a current appraisal on the home.Posted: Tue Feb 10, 2009 06:47 am Post Subject:
if you can google for your mortgage then surely you will find some good mortgage calculators (which gives results in excel sheets) so you won't find difficulty in finding a good deal for your query. :lol: :lol:
Posted: Mon Feb 23, 2009 04:24 pm Post Subject: pmi
how much does the appraisal have to be (typically) to drop the pmi? if i bought my house for 55k (short-sale) and have rennovated the bathrooms (which were almost unusable) and the kitchen (origonal from late 50's) and new paint and carpet, the value of the house should be a lot higher. what would the house have to appraise for (approximately) to drop the pmi? if its all in the loan docs, what normal?
thanks,
Matt
Posted: Mon Feb 23, 2009 07:36 pm Post Subject:
how much does the appraisal have to be (typically) to drop the pmi?
This info was posted in the beginning of the thread. It's not what the house was bought for... it's the percentage of the amount owed on the loan to value (LTV). You can call your mortgage company and ask them what you home needs to be valued at to have PMI removed.Posted: Wed Jan 27, 2010 12:51 am Post Subject:
I have paid my mortgage down to 78% with extra payments and it has not been automatically removed. The bank has charged me for PMI going on two months now since it was paid down.
In addition, their site says for removing PMI automatically it will be done when it is "scheduled to go to 78% according to their amortization schedule" not when it actually reaches 78%. As their own site shows my LTV less than 78% right now.
Posted: Wed Jan 27, 2010 02:08 am Post Subject:
Thought this may be helpful. Looks like this is a lot different than everything else I have read online.
The "cancellation date" under the automatic termination provision is defined as the date when the loan is "first scheduled to reach 78 percent of the original value of the property securing the loan." The optional "cancellation date" occurs when the amortization schedule requires the loan balance to be "80 percent of the original value of the property securing the loan" -- or sooner, if a borrower has made extra payments to reach the 80 percent level.
Posted: Wed Jan 27, 2010 11:13 am Post Subject:
I've personally had PMI removed from three different homes/mortgages, in my life the very second the balance reached 80%..Not one time did they do it automatically, and without me calling to raise a little well..you get the point...and it was removed immediately after my call...so many people waste so much money, not staying on top of this.
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