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What is Private Mortgage Insurance (PMI)? Can I get rid of the PMI on my loan?
Private Mortgage Insurance or PMI is normally required when you buy or refinance a house with less than a 20% down payment. Mortgage Insurance is a type of guarantee that helps protect lenders against the cost of foreclosure. This insurance protection is provided by private mortgage insurance companies. It enables lenders to accept lower down payments than they would normally accept. In effect, mortgage insurance provides what equity of a higher down payment would provide to cover a lender?s losses in the unfortunate event of foreclosure. Therefore, without mortgage insurance, you might not be able to buy a home without a 20% down payment.
The cost of PMI decreases as your down payment increases. Example: The cost of PMI on a 5% down payment loan is more than the cost of PMI on a 10% down payment loan. Your PMI premium is normally added to your monthly mortgage payment.
The decision on when to cancel the private mortgage insurance coverage does not depend solely on the degree of your equity in the home. The final say on terminating a private mortgage insurance policy is reserved jointly for the lender and any investor who may have purchased an interest in the mortgage. However, in most cases, the lender will allow cancellation of mortgage insurance when the loan is paid down to 80% of the original property value. Some lenders may require that you pay PMI for one or two years before you may apply to remove it.
To cancel the PMI on your loan, contact your lender. In most cases, an appraisal will be required to determine the value of your property. You will probably also be required to pay for the cost of the appraisal. Another way of canceling the PMI on your loan is to refinance and get a new loan without the PMI.
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"With all the different loans programs available I didn't know the best program for me. With the help of my Grand Oak Mortgage Company Loan Officer I ended up with a loan program that saved me nearly $100/month on my house payment" - Mr. & Mrs. Wink
"The staff went up and above any of our expectations. Explaining everything step by step, very professional and helpful" - Dale Gohn & Kristie Tickle
"As a first time home buyer I was very unclear on what was involved in applying for a mortgage and what points and closing costs really were. Grand Oak Mortgage Company took the time to explain and educate me and my wife on the entire mortgage process" - Mr. & Mrs. Zlotnik
"Thank You Grand Oak Mortgage, my loan experience was all that you said it would be, fast and hassle-free" - Mr. & Mrs. Babcock
"Grand Oak Mortgage was great to deal with. Everytime, I spoke with them they were very upbeat and happy. It was a real pleasure dealing with such a great staff. They were very patient with me even when they had to explain things to me twice" - Mr. Passalacqua
"My Loan Officer was very helpful and all for us, she gave us insight into the ins and outs of the business" - Mr. & Mrs. Gonzalez
"Grand Oak Mortgage was very helpful, we want to thank them for getting us in our house. Very good company, who cares about their clients" - Mr. Zak
"With all the different loans programs available I didn't know the best program for me. With the help of my Grand Oak Mortgage Company Loan Officer I ended up with a loan program that saved me nearly $100/month on my house payment" - Mr. & Mrs. Wink
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