Remove
Your PMI
PMI, the
acronym for private mortgage insurance, allows an individual(s)
to purchase their home with less than a 20% down payment. The
question the homeowner must ask themselves is:
"Is
it time to stop paying monthly into my escrow account for
PMI and start putting that money into my pocket???"
The most important
question is to ask is if the current loan balance is less than
80% of the home's current market value. Since it is difficult
to be objective about the value of one's own home, the owner
should get an unbiased second opinion. A Realtor who is familiar
with the area may be able to help with a valuation through a
comparative market analysis.
A preliminary
consultation with a trained appraiser familiar with your area
could also help the homeowner. There has been a lot of discussion
in the press recently regarding consumers that are unnecessarily
paying private mortgage insurance. The possible ways one may
have achieved enough equity in their home to qualify for a PMI
free mortgage are:
- Owner has
paid enough to reduce the principal mortgage balance below
the 80% Loan-To-Value (LTV)
- The home
has appreciated sufficiently enough so that the mortgage balance
is 80% or less LTV.
- Owner has
upgraded the home so that the new appraised value will equal
at least 20% of the current market value.
Upgrades include
making significant improvements such as adding decks, patios, finishing
basements, updating kitchen and baths, replacing roofs or furnaces,
or making other additions to the home or real property. Improvements
that are typically not considered upgrades include window treatments
or decorating.
If the homeowner believes that the above criteria has been
met, the next step is to contact the current lender requesting information
on the requirements to remove the PMI coverage. The most common conditions
are, but not limited to, the following:
- A minimum period of
time has elapsed since the loan closed. This may vary from as few as 6
months to more than 2 years, depending on the investor.
- The loan is current
with no history of late payments.
- A new independent appraisal
performed by a lender approved appraiser. The homeowner will be required
to pay the appraisal fee that is quoted on an individual basis by the appraisal
professional.
- The loan balance must
be below 65% to 80% of the current property value.
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