How much do you know about private mortgage insurance (PMI)? If you own a home, this is a topic you need to be familiar with, and learning more could show you how to save thousands of dollars.
PMI is an insurance policy that the borrower pays for on behalf of the lender. This protects the lender in case the borrower defaults on the loan. It’s typically required on loans where the borrower was not able to put down 20% of the value of the house at the time of the loan setup.
The cost of PMI can be substantial, as it is typically a percentage of the monthly payment made to the lender. For example, if the monthly payment is $2,500 and the PMI rate is 1%, the borrower would pay an additional $250 per month for PMI.
“Removing your PMI could save you thousands of dollars.”
To remove PMI, the borrower should check their loan documents to determine the date when it automatically drops off, typically when they’ve paid 78% of the loan. There is also usually a date when the borrower can request to have it removed, which should be specified in the loan documents as well. Borrowers should be diligent about knowing when these dates are and double-checking to ensure that PMI is removed as scheduled.
To request the removal of their PMI, borrowers should reach out to their lender and find out the procedure, which may involve ordering an appraisal to determine the current value of the home. Borrowers can also ask their Realtor to provide a price opinion to get an idea of the home’s value.
If you want my help with this or have any questions, don’t hesitate to reach out. You can call or email me anytime and I would be happy to hear from you.