Private Mortgage Insurance: What is it and Can I Get Rid of it?
Private Mortgage Insurance (PMI) is typically required when you make a down payment of less than 20% on a home purchase. It is designed to protect the lender in case you default on your mortgage. The good news is, yes, in most cases, there are steps you can take to drop PMI and save money each month (depending on your loan type)!
First, review your mortgage documents or contact your lender to understand the specific requirements for PMI removal. Familiarize yourself with the conditions and timeline for dropping PMI.
Second, consider making extra payments. Talk to your lender about the pros and cons of doing this for YOUR situation. Typically, extra payments accelerate the reduction of your loan balance, reaching the 20% equity threshold faster.
Third, continue to build equity in your home by remodeling or making home improvements. Call on us for advice on what updates will be substantial enough to make an impact.
When you believe you have enough equity to drop the PMI, your lender will request an appraisal on your home. Call us first! We can do a market analysis on your home (for free). This will give you a good idea of your equity position and will help you determine whether or not the ratios work to drop PMI.
Kristin Beise, RE/MAX Advantage Plus