PMI is an avoidable extra cost associated with buying a home. That said, sometimes paying PMI is the right move; it can help you get into a home that would otherwise be out of reach.
If you're a current or prospective project management professional, you should consider earning a PMI certification. Whether you are an entry-level project manager or a seasoned professional, certification can help you take your career to the next level.
The cons to PMI are that it remains with a mortgage until the principal balance falls to 80% below the value of the home. It may take years to reach this threshold and, until then, you'll continue to pay it.
Even if you don't ask your servicer to cancel PMI, in general, your servicer must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments.
If you buy a $300,000 home, you could be paying somewhere between $600 – $6,000 per year in mortgage insurance. This cost is broken into monthly installments to make it more affordable. In this example, you're likely looking at paying $50 – $500 per month.
A borrower can request PMI be canceled when they've amassed 20 percent equity in the home and lived in it for several years. There are other ways to get rid of PMI ahead of schedule: refinancing, getting the home re-appraised (to see if it's increased in value), and paying down your principal faster.
What Does a High PMI Reading Indicate? The Purchasing Managers' Index reading can range between 0 and 100. If the index reading is higher than 50, then it indicates an economic expansion. This means that the closer the reading is to 100, the higher the degree of positive economic growth.
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Many lenders (like Fannie Mae) also require a two-year “seasoning requirement,” meaning you can't have PMI removed until you've made two years' worth of on-time payments—even if your equity has grown above 20%. If it's been less than five years, you might even be required to have 25% worth of equity.
If home values have gone up in your area or you've made a lot of improvements to your home, you could have more than 20% equity based on the home's current value. Providing the loan-to-value ratio with a new appraisal value meets the lender's requirements, you may be able to get PMI taken off.
For a little more than a decade, PMI was tax deductible for homeowners who met eligibility requirements and itemized their deductions. Since the 2022 tax year, it's no longer possible to take deductions on new mortgage insurance payments, as the PMI deduction has expired.
Private mortgage insurance can make your housing payments more expensive. But in some cases, it may be worth it. Many mortgage lenders require a 20% down payment when you close on your home. But some lenders will give you a loan even if you don't have 20% to put down.
If you can easily afford it, you should probably put 20% down on a house. You'll avoid paying for private mortgage insurance, and you'll have a lower loan amount and smaller monthly payments to worry about. You could save a lot of money in the long run.
PMI is a type of insurance that protects your lender if you default on your loan – but it gives you no protection as the buyer other than the freedom to make a smaller down payment. As you build up equity in your home, you may be able to cancel your private mortgage insurance so you can save money each month.
There are two ways for a borrower to request cancelation of PMI: a) based on the original value of your home or b) based on its current value. If you meet the qualifications for either of these methods, your mortgage servicer has to cancel your PMI upon request.
Simply put: if you have an FHA loan term of more than 15 years, have been paying it for at least 5 years, and have an LTV ratio of 78% or less, PMI can be removed from the loan.
The loan has not been more than 60+ days past due in mortgage payments within the last two years or 30+ days past due within the last year. There has not been a property value decline based on the actual sales price or original appraised value.
Most lenders require that your LTV ratio be 80% or lower before they will cancel your PMI. Note: Some lenders express the percentage in reverse, requiring at least 20% equity in the property, for example.
This means that from the start of your purchase, you have 20 percent equity in the home's value. The formula to see equity is your home's worth ($200,000) minus your down payment (20 percent of $200,000 which is $40,000). You only own $40,000 of your home.
Virtually every lender requires PMI for conventional mortgages with a down payment less than 20 percent. Some lenders advertise “no-PMI” loans, but these are essentially lender-paid insurance arrangements — you'll likely pay a higher interest rate in exchange.
A PMI reading over 50 or 50% indicates growth or expansion of the U.S. manufacturing sector as compared to the previous month, while a reading under 50 suggests contraction.
Your home equity needs to be at least 20%, or you will need to pay for PMI. The good news is that you can request that your lender remove PMI once the principal balance of your loan reaches 80% of the original value of the property. To request removal, you will need to submit a request, in writing, to your lender.
Once your home equity reaches 22%, your PMI payments will automatically stop. To stop PMI payments sooner, when your home equity reaches 20%, simply ask your lender to stop the PMI payments. What is PMI or Private Mortgage Insurance?
It's charged in a lump sum equal to 1.75% of your loan amount. It's typically financed (added) to your mortgage amount. It can be paid in cash, as the long as the amount is paid in full (partial cash payments aren't allowed) It isn't refundable unless you replace your current FHA loan with a new FHA loan.