The borrower pays for mortgage insurance on a monthly basis in addition to the principal and interest payments that are made on a loan. The lender then transfers these premium payments to the mortgage insurance company.
Yes. MI companies offer several options to the borrower at the time of closing. A monthly premium plan requires two monthly premiums be paid during the closing, with a set monthly premium due thereafter as part of the required mortgage payment.
No. There are several ways to avoid private mortgage insurance premiums.
Yes. Lenders will allow borrowers to remove the MI requirement once the property's appraised value increases such that the loan to value ratio is below 80%. The reality of trying to accomplish this can be somewhat challenging. Usually the lender will require that an appraisal be done by the lender's approved appraisal companies. Contact your current mortgage holder to determine their policy on removing mortgage insurance from an existing loan.
Or of course by refinancing your loan. Then the LTV (and PMI amount) is based solely on the appraised value and new loan amount, which makes a lot of sense if rates are lower now than your current rate, or if you PMI amount drops enough.
Lenders have determined that those with more than 20% equity are less likely to default on the mortgage. PMI allows homeowners to purchase a home with less than 20% down by insuring the lender against default.
2) The lender must allow you to cancel PMI when your equity is 22% or more.
3) And you can ask for permission once your equity reaches 20%.
The new law only affects new mortgages funded after July, 1999, but Fannie Mae and Freddie Mac have said they will apply the new rules to the older loans.
FHA loans are not required to drop PMI under the same rules as conforming loans - if you have an FHA loan - expect to keep paying PMI for at least 5 years AND until your LTV is less than 78%. Refinancing may be the best option for you.
Payment history is very important. If you have a payment more than 30 days late in the past year, or a payment more than 60 days late in the past two years, the lender is not required to drop PMI.
1) Determine the estimated value of your home, and make sure it's enough to qualify.
Fill out my form!