What Is It About PMI and How Do You Cancel It?

Know More About PMIIt can be frustrating to see a dream home come to the market and not be able to jump on the opportunity. With some preparation, it is possible to be quickly approved. However, most mortgage lenders do want potential homebuyers to make a 20 percent down payment on a home. This offers them a modicum of security that borrowers are invested in paying off a home loan.

PMI allows lenders to approve borrowers who need to make smaller down payments. When it comes to conventional home mortgages, eventually borrowers can eliminate private mortgage insurance payments. This process can be sped up.

Learn more about PMI when it comes to conventional loans and how to eliminate PMI payments quickly today.

The Necessity of Private Mortgage Insurance

Plenty of home buyers want to purchase a home but may not be able to come up with a 20 percent down payment. This is where PMI or private mortgage insurance comes in. This additional charge and associated premiums are necessary to pay as payments protect the lender. Payments in no way assist in building equity. Therefore the sooner a homebuyer can establish sufficient equity to remove PMI payments the better. PMI fees can vary. PMI premiums and tax deductions can also change. A good credit score may improve interest rates on PMI.

How to Cancel PMI

PMI is a hassle and does nothing to pay down the outstanding debt homeowners owe on a home mortgage. It is possible to cancel PMI on a conventional loan. This is not possible for FHA loans as PMI will be required for the life of a loan. This is another reason to take time to possible improve credit scores and reduce debt in order to be approved for a conventional loan. However, other loan product options do make homeownership more accessible for many potential buyers who may not be able to be approved for a conventional mortgage loan.

There are conditions that must be met in order to no longer pay the required PMI on a conventional home loan. First of all, a homeowner must have a minimum of 20 percent of home equity. The homeowner can then request the cancellation of PMI. This can require proof of attaining this equity position through an independent appraisal which can cost a borrower up to $500. If a homeowner does not take this route, a mortgage service provider will eliminate PMI requirements when a balance of 78 percent remains. For those that have taken out an FHA loan, their insurance cannot be cancelled. Rather homeowners need to refinance their loan into one that is not insured by the FHA. All things to consider even before preparing to purchase a home.

In order to cancel PMI faster on a conventional loan, borrowers may:

  • Prepay a loan;
  • Remodel a Rolling Hills home to increase home value;
  • Refinance when a home has appreciated; or
  • Get a new appraisal.

There may be issues that prevent refinancing right away. One may include having to wait two years before beginning the refinancing process. Consider all approaches when looking to eliminate the extra financial burden of PMI insurance.

Avoid PMI Payments

Buyers who put down 20 percent can get around paying PMI as they are able to establish sufficient equity in a home to reduce risks for lenders. Other options include combination loans and being approved for a VA loan. Explore mortgage products and associated fees and insurance before getting locked in with a specific lender.

Dylan Snyder is a seasoned real estate professional serving the Jupiter real estate market, Palm Beach real estate market, Palm Beach Gardens real estate market, North Palm Beach real estate market, and the surrouding Palm Beach County area. Along with being a top producer in Jupiter real estate, Dylan's professionalism and expertise in luxury and waterfront real estate sets him and his team of real estate experts apart from the competition. For more information on Jupiter and Palm Beach real estate for sale, contact Dylan at (561) 951-9301.

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