Home ownership is not only rewarding but it is one of the biggest investments of your life. Part of this investment includes your mortgage payment, home insurance, property taxes and for some people, the additional cost of Private Mortgage Insurance or PMI.
If you purchase a home with less than 20% down, then it is likely your lender will minimize their loan risk by requiring you to buy Private Mortgage Insurance. It is an added monthly expense that could be avoided altogether.
What is Private Mortgage Insurance (PMI)
It is a type of mortgage insurance used with conventional loans that would reimburse the lender if you default on payments.
How to get rid of PMI
You can avoid PMI altogether by saving up 20% for a down payment. When you pay 20% down, PMI is not required with a conventional loan. But not everyone has this much to put down on a home. Below are other ways to get rid of PMI:
- You can request to cancel your mortgage insurance once you have 20% equity in your home. You must make the request, in writing, with your lender. Make sure your mortgage payments are current and you have a good payment history before requesting your PMI to be canceled. To learn more about the requirements to removing your PMI visit the Consumer Financial Protection Bureau
Otherwise, PMI will automatically drop off once loan to value ratio reaches 78% based on the initial property value.
- Search for special mortgage programs that are willing to wave your mortgage insurance based on your good credit history. For instance, ECCU is offering a program with no down payment and no PMI for a limited time. Whether it is an initial home purchase or you are wanting to refinance your existing mortgage, you could eliminate PMI.
- Getting your home reappraised. Did you purchase your home during a depressed market at an undervalued price and now home values around you have increased? Or have you added any rooms or significant remodeling that would raise the value of your home? If so, it may be worth considering getting a new appraisal which may be higher now and allow you to reach that 20% equity threshold. Keep in mind that you are required to carry PMI for at least 24 months. After 24 months however, it is an option you may want to consider. Before you go this route, you need to speak with your lender as dropping PMI through home reappraisals can be complicated and not always guaranteed. Your lender can help you evaluate your options. Appraisals typically cost $300 – $500.
- Refinance your home using ECCU’s No PMI mortgage By bringing your mortgage over to ECCU and financing with the no money down and no PMI mortgage special, you will instantly drop your PMI payments and save!
If you are looking to get rid of your PMI, then start by calling a lending expert at ECCU who can determine if our no money down and no PMI mortgage special is right for you.