Private Mortgage Insurance (PMI) is a type of mortgage insurance that the lender may require on your Conventional mortgage, depending on the down payment or the amount of equity you have in the property. PMI is not there to protect you as the borrower! PMI protects the lender in the case that you default on the loan.

So how do we get rid of this pesky PMI? 

#1 - Automatic Cancellation - This is the most common way that mortgage insurance is removed. With this method, you simply continue to pay your mortgage. As you pay down the loan, you’ll build equity in the property. Once you hit 78% loan to value (LTV), the lender must remove your PMI. 

#2 - Pay Down The Loan Amount Or Increase The Property Value (Build Equity) - This option is twofold. You have the option to pay down the principal on the original loan amount to 80% loan to value (LTV). For example, if you purchased the home for $100k with $10k down, your current loan amount would be $90k (90% LTV). By putting an additional $10k down, we would lower the loan amount to $80k (80% LTV). 

You also have the option to increase the equity of your home itself, which includes things like adding a pool or bedroom. If you are going this route, four things must occur. You must have a written request, no liens on the property, no late payments in the past 12 months, and you must get a new appraisal to confirm the increase in value. 

#3 - Current Market Value - The way that sales prices have been appreciating lately, homeowners may be sitting on a large chunk of equity but still paying PMI. To use the property’s current market value to remove the mortgage insurance, you must be at a 75% LTV if you have been in your home for two or more years. If you have been in your home for five or more years, they will allow you to go to 80% LTV to remove the mortgage insurance.

#4 - Refinance - If refinancing makes sense with your goals, this is an excellent way to remove mortgage insurance. You could also lower your interest rate or tap into the home's equity to pay off debt, pay for updates for the home, kids’ college, etc. 

If you are interested in discussing your options to remove mortgage insurance, contact Chissell Mortgage today at (727) 376-6900.You can also visit us at https://www.chissellmg.com/ for more information. 

NMLS ID: 327290; NMLS ID: 2062741

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