What is Private Mortgage Insurance (PMI) and How do I remove it?

TopMortgageOptions.com -- This is the top choice if you are trying to eliminate PMI from your current mortgage.
LowerMyBills.com -- You will get up to four individual offers from their database of home lenders that specialize in bad credit. This is a great place to start your search.
Ameriquest Mortgage -- Ameriquest Mortgage is one of the most recognized lenders in the U.S.

What is Private Mortgage Insurance (PMI)?

PMI is Private Mortgage Insurance which insures the lender against loss if the borrowers defaults on the mortgage loan. PMI is usually required when the borrower’s down payment or equity is less than 20% of the loan value. Of course, not all lenders require PMI, although those that follow the Fannie Mae and Freddie Mac guidelines for loan approval do require PMI.

The mortgage insurance is usually escrowed into your mortgage payment, and when a borrower reaches 20% equity, they no longer need mortgage insurance. PMI is the equivalent of FHA or VA insurance on government mortgage loans. Apply today and see if you can avoid PMI.

How Can I avoid PMI?

The easiest way to avoid PMI is to invest a 20 percent down payment at the time of the loan. Lenders will not require PMI when the loan to value (LTV) is 80% or less. However, coming up with 20 percent down payment is very difficult for many borrowers. Another way to avoid PMI is to apply for subsidiary financing (home equity loan or line of credit) and close it at the same time as your first mortgage. These types of programs are referred to as 80/20, 80/10/10, 80/15/5, etc.

Another way to avoid PMI is to use a subprime or B-Credit lender. These loans will often have higher interest rates, but at least interest is tax deductible (where PMI is not). Find the no PMI program that's right for you!

When can I remove PMI and How do I do it?

PMI payments can be dropped from your mortgage when your LTV falls below 80%. Most lenders will not automatically drop your PMI though. It is the borrower's responsibility to contact the lender and pay for a real estate appraisal. If the appraisal shows that your loan has fallen below 80% LTV, then your PMI will be dropped. Refinance your home, lower your rate and stop paying PMI today!

Note: If your LTV has fallen below 80%, it may be beneficial to consider refinancing your home or getting a home equity loan/line for the equity. Lines of credit can be good emergency funds in case of sudden loss of income and should be applied for when the borrower is in a good financial situation and employment status. Many borrowers do not apply for lines of credit during this time and wish they would have when tough financial times come up. Banks/lenders will not lend you money if you do not have a job, but will not close one that's already been opened. Click here to apply for your emergency home equity line of credit.

How Much Is PMI?

Premium prices vary. They are based on the size of the down payment, type of mortgage and amount of insurance coverage. Premiums typically are folded into your monthly mortgage payment. The range for a median priced home is $50 to $80 per month (in 2001, the national median price for a single family home was $147,500). You can pay the premium up front and finance it as part of your mortgage. Lender-paid policies also are available, but they result in a higher interest rate on the mortgage. Apply for a loan and avoid PMI today!

Lender Ads: