Private Mortgage Insurance, or PMI, is the insurance you pay on a loan when you have a low down payment. This is to protect lenders and investors from defaults on a mortgage loan.

You typically are required to have mortgage insurance if you put down less than 20% of your home’s purchase price.  That’s why you need to weigh the benefits before you take the low-down payment loan you qualified for – once you take mortgage insurance into account, you may realize it’s more expensive over the long run.  You can spend over a thousand a year on PMI alone, and frankly that’s not an uncommon figure.

So, how do you avoid or get rid of your Mortgage Insurance?

Thankfully, it’s not that difficult, though it may take a little time.  The most straightforward way to get rid of PMI is to either pay the 20% down payment up front, or work to pay your mortgage down to below the original 80% of your home’s value.  You can then request to have your PMI removed, so long as you maintain a good payment history.  Details of requirements from the Consumer Financial Protection Bureau can be found here.

Sometimes, your lender can request an appraisal of the home to make sure the value hasn’t decreased below the original value.  So sometimes factors spring up, but unless something has dramatically changed in your home’s value, getting below 80% of your home’s value is a good sign you can get rid of your PMI.  To check whether your loan balance is below 80%, just divide your current loan balance by the original appraised value of your home.

OR, if you have done some remodeling or believe your home’s market value has increased, getting an appraisal and asking your lender to recalculate your loan-to-value ratio can put you below the 80% that you need to cancel PMI.  So be aware that an appraisal could be in your favor as well – but check with your lender to see if they will consider a new appraisal instead of the original purchase price of your home beforehand.

If we can help in any way, we’d love to answer any questions about PMI, a possible mortgage loan, or anything in between!  We’re a faith-based family-oriented Christian Mortgage Lender, and it makes our day when we get to help you and your family get your dream home.




The Christian Mortgage Mom