Private Mortgage Insurance (PMI) is intended to protect the lender in the event that the borrower defaults on his mortgage. It is typically required when the borrower’s down payment is 20 percent or less of the purchase price. PMI costs are added to the debtor’s monthly mortgage payments in conventional loans. Homeowners that are seeking to discontinue PMI must make the lender comfortable that the mortgage has been sufficiently paid down.
PMI is one type of mortgage insurance. Homeowners can benefit from PMI by allowing them to qualify for otherwise difficult-to-obtain loans. However, the overall monthly cost of the homeowner’s loan will increase if PMI is added to the payment. Alternatively, in some cases, the debtor can choose a conventional loan with a smaller down payment and a higher interest rate to avoid obtaining PMI. This can be more or less costly than monthly PMI payments depending on a number of circumstances.
Homeowners that accumulate an adequate amount of equity may succeed in eliminating PMI from their monthly payment. This can result simply from the owner making a sufficient number of payments on the mortgage to increase his equity in the home. The lender, at some point, may decide that the debtor no longer needs PMI and will eliminate it from the periodic mortgage payments. Alternatively, sometimes a home’s value has risen substantially for a number of reasons. If the increase in value is stable (such as in the event the rising value is the result of significant home improvements), the lender may agree to discontinue PMI payments by the homeowner.
If the homeowner can eliminate PMI from his mortgage debt, there are specific steps established by the lender and insurer for doing so. In general, a debtor should ask the lender about requirements for canceling PMI. You will the likely need to get an appraisal to determine the value of the home. Once you calculate your loan to value ratio, you can assess whether you are a candidate to eliminate PMI. For many lenders, a ratio below 80% is sufficient to cancel an owner’s PMI.
The experienced team of attorneys at the Law Offices of Mark Weinstein, P.C. can help you litigate your real estate claims. Contact Mark Weinstein and his colleagues at (770) 888-7707 or visit them at https://www.markweinsteinlaw.com to find out how they can advise you.