How to Get Rid of PMI
If you secured your mortgage through a conventional loan, there is a chance you added private mortgage insurance, also known as PMI. PMI may protect your loan, but it can also cost you hundreds of dollars each month. Here is some information about PMI and ways you can save money by dropping it from your mortgage.
What Is PMI?
Private mortgage insurance protects your lender in case you default on your loan or go through foreclosure. PMI is usually required if you have a conventional loan and make a down payment of less than 20%, or if you refinance and your equity is less than 20% of your home’s value. The only benefit that you get from PMI is the ability to make a smaller down payment.
How Much Does PMI Cost?
PMI depends on a variety of factors, just like your mortgage. The smaller your down payment is, the higher your PMI will be to cover your risk factor. A low credit score can also raise PMI since those with lower scores are more likely to default. However, fixed-rate loans will have lower PMI because they’re more predictable. Regardless of how high or low it is, your PMI can still be a few hundred dollars a month.
Ways to Get Rid of PMI
If you’re purchasing your home or refinancing, there’s a clear path to get rid of PMI. The first step is to build equity. You can’t cancel your PMI until your home equity reaches 20%. You can, however, raise your home equity by making loan payments. The second step is time. Most lenders require that you make 24 payments before being eligible to remove PMI, although some lenders allow removal after only 12 on-time payments. Once you’ve reached that 20% threshold and you have reached the required time threshold, contact your lender to get rid of PMI.
For those refinancing their home, 20% home equity must still be reached to get rid of PMI. But after applying for your refinance and clearing all your paperwork, your new loan won’t include PMI.
Contact Your Florida and Georgia Mortgage Experts
Whether you’re a first-time or experienced buyer or looking to own a home or refinance, secure your home loan through Butler Mortgage. We’ve worked with potential homeowners throughout the states of Florida and Georgia for more than 25 years. We are ready to help find the best loan solution for you. Call us today at 407-931-3800 to schedule an appointment or fill out our free consultation form online.