Refinance to get rid of PMI.. previous version of this article incorrectly stated the loan-to-value ratios and years of ownership required to cancel private mortgage insurance based on a new.
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Mortgage Insurance, or PMI, is what you pay to protect the bank (not you!) for having a mortgage and not having 20% of a down payment or equity. You also have to pay PMI if you have an FHA loan. To make it clear: you will pay several hundred additional dollars per month in insurance which gives you no benefits.
This means you owe 76% of the home’s value — well under the 80% loan to value that triggers the need for mortgage insurance. Under these circumstances, you can refinance into a new loan without.
You’ll have to refinance from a government-backed loan to a conventional mortgage to get rid of PMI. And the rule for the new mortgage’s value compared to your home’s value still holds true.
Private mortgage insurance (PMI) is incurred if you need to finance more than 80% of the purchase price of a home. You can avoid PMI by simultaneously taking out a first and second mortgage on the.
Hi Colin, PMI question for you. I was reluctantly paying $299/mo for PMI and recently made an additional principal payment to get my mortgage down below 80% of original value.
Most people want to get approved for a no PMI mortgage because it avoids having to pay mortgage insurance monthly, but there are cases where it might make sense to pay PMI. One of the most common is where a person has poor credit and can only get a HUD-backed loan from FHA with mandatory PMI for the life of the loan.
If your home’s value is so low that you’re underwater, you can’t refinance. If your appraisal value puts your home equity at less than 20%, you’ll get stuck paying for private mortgage insurance.
By refinancing, homeowners with PMI can often get a new mortgage without PMI and save money. Today, mortgage rates are hovering around historic lows, offering homebuyers who have not recently refinanced an excellent opportunity to refinance and lower their monthly payment.
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