Removing PMI from Your Mortgage

Removing PMI from Your Mortgage

If you're a homeowner, mortgage insurance payments (PMI) might feel like a weight on your monthly bills. While PMI may be required to secure a mortgage, the ultimate goal is to remove this expense as soon as you are able to.  There are specific pathways to removing PMI.  Below, I will go into further detail.  If you are interested in exploring this option further, I highly recommend speaking with your mortgage broker/lender or the company that is currently servicing your loan.  The information below pertains to conventional loan products.  The removal of PMI from an FHA loan follows different guidelines- always best to check in with a lender for the specific details.

Understanding PMI

Before diving into removal strategies, it's important to understand PMI and why it's part of your mortgage. Mortgage insurance is typically required by lenders when the borrower's initial down payment is less than 20% of the home's purchase price. This insurance protects the lender in the event that you default on your mortgage.  

Assess Your Eligibility

For those with a conventional mortgage, there are certain criteria that, when met, can trigger the automatic removal of PMI. These include scenarios where your mortgage loan is eligible to be terminated because the loan's principal balance is scheduled to reach 78% of the original value of the property or the loan's mid-point. Additionally, your payments must be current.  For borrowers who seek to terminate PMI sooner, it's crucial to ensure that your loan-to-value (LTV) ratio meets the specified criteria – usually 80% or less.

Additional Considerations

While the path to PMI termination is relatively clear, some details can influence the process and timing. For instance, the age of your mortgage, the housing market, and the type of mortgage you have can all play a role in the removal of PMI. It's wise to consult with a financial advisor or mortgage expert to ensure you're following the best path for your unique situation.

I would love to discuss the plethora of strategies we can use to help you get the most from your home, its sale, or your next purchase. Call me anytime at (203) 913-3698!

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