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Eliminating Private Mortgage Insurance (PMI)
If you
have owned your home for more than five years, here is a tip that might save
you thousands of dollars. Homes purchased with a loan greater than 80%
of the sales price require Private Mortgage Insurance (PMI).
The premium is typically one or two percent of the mortgage amount at
closing and approximately .0267% to .075% per month thereafter for the
renewals.
When
your equity has increased to 20%, you are no longer required
to have PMI in most cases, but you will have to petition to have it removed. One way
for your equity to increase is to reduce your principal down to 80% of the
original purchase price; however, this usually takes 12 or more years unless
you are making additional principal contributions.
The most
common way for your equity to increase is for your home’s value to increase.
The difference between your unpaid balance and what your home is worth is
you equity. The mortgage company may require a new appraisal to
confirm the current value of your home, but before you shell out for an
appraisal, ask your lender if they will accept the assessed value.
Feel
free to
contact me and I will be more than happy to provide you with the
assessed value of your property and information regarding the recent sales
of comparable properties in your area. You would then be able to
present the information to your lender and hopefully save a significant
amount of money.
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