The Basics of PMI


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You are able to secure a mortgage with less than 20% down with the help of Private Mortgage Insurance (PMI). With higher home prices, an increasing number of consumers are taking advantage of PMI.

On average, it would take a couple five years to save 20% down on a modestly priced home. With PMI, a couple can purchase a home year earlier.

PMI basically protects your lender if you default on your mortgage. It is based on the amount you borrow for your home, and is included into your monthly payments. The most important thing about PMI is that the lender is protected against default, you are not protected.

You will pay the PMI until the amount of your outstanding balance falls below 22% of your home's value. If you purchased your home before July 29, 1999, you will have to require that your PMI be canceled. If you purchased or refinanced your home after July 29, 1999, and your loan is not a FHA or VA loan, your lender should automatically terminate your PMI when your equity reaches 22% of the original property value.

Rather than wait, you can request that your PMI be canceled when your equity reaches 20%. If you have a Fannie Mae mortgage, your PMI can be cancelled when your loan balance reaches 75% of your home's current appraised value. The loan must be two years old and paid on time.

You shouldn't pay your PMI longer than necessary. This is a simple waste of your money. Know what your principal balance needs to be in order to cancel your PMI and watch it closely. You need to notify your lender to cancel your PMI as soon as possible. There is a lot of difference between 20% and 22% equity in your home, and you could spend a lot of money on PMI waiting for the lender to automatically cancel it.

If you put less than 20% down on your mortgage, you are paying PMI. Call your lender and ask for the details on when and how it can be cancelled. There are businesses that will do this for you for a fee, but it is so simple, you can easily do it yourself.

In order to cancel your PMI, your mortgage payments must be current for one year and you cannot have any liens on your property.

Martin Lukac represents and , a finance web-company specializing in real estate and mortgage rates. We specialize in daily updates, mortgage news, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies!


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