Last month, we talked about the record amount of equity homeowners have built. So naturally, there’s a follow-up question:
If your home has increased in value…are you still paying PMI that you may no longer need?
Okay Phil…What Exactly Is PMI?
PMI stands for Private Mortgage Insurance.
It’s typically required on a conventional mortgage when you buy a home with less than 20% down. It protects the lender—not the homeowner—if the homeowner defaults.
The good news? PMI isn't necessarily forever.
For many conventional mortgages, you can generally request that PMI be removed once your loan balance reaches 80% of the home's original value.
In general, PMI is automatically scheduled to terminate once the loan reaches 78% of the home's original value, as long as you're current on your payments.
But What If My House Has Gone Up in Value?
Let's jump into an example with the following scenario:
Original Purchase Price: $400,000 Original Mortgage: $380,000
At closing, you only had 5% equity, so PMI made sense. Fast-forward a few years:
Estimated Home Value: $460,000
Current Mortgage Balance: $360,000
Based on today's value, you may now have more than 20% equity—even though you haven't paid your mortgage balance all the way down to 80% of the original purchase price.
Could that appreciation help you remove PMI early? Possibly.
Some conventional loans may allow mortgage insurance to be removed based on the home's current value. Keep in mind, your mortgage servicer has to approve the removal.
So…Am I Still Paying PMI?
Pull out your most recent mortgage statement and take a look. If you're not sure what you're looking at, send it to me.
I'll help you figure out:
Whether you're currently paying mortgage insurance
What type you have
Approximately how much equity you may have today
Whether it might be worth contacting your servicer about removal
Important: PMI cancellation rules vary by loan type, loan investor and servicer. FHA mortgage insurance follows different rules than conventional PMI. Your mortgage servicer ultimately determines eligibility and any valuation requirements.
A three-pack of Levi & Rosie cuteness! September is a busy month with so many birthdays and Levi starting PK 4 and Rosie starting PK2. Don't they look mischievous?!
WHISKEY OF THE MONTH
free whiskey raffle
Giveaway Time!
Congrats to the most recent winner, Andrew O.
This month, we're giving away a Russell's Reserve private barrel pick from Bourbon Belly Hospitality. They always have excellent picks, and this bottle is a slapper!
LOCAL EVENTS
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The Bukowski Team
Philip Bukowski | Branch Sales Manager @ The Money Store | NMLS ID# 1403277 | Co. NMLS ID # 1019 405 Illinois Ave | Suite #2C | St. Charles, IL 60174 M: 630-254-3752 | E: phil@themoneystore.com
Any statements or opinions presented here are those of the author and do not necessarily reflect those of MLD Mortgage, Inc. dba The Money Store. Any predictions or forecasts presented here are not guaranteed outcomes and should not be relied on as such. Any mortgage programs, interest rates, payments, or mortgage scenarios presented here are provided for informational purposes only and are not quotes, offers of financing, or commitments to lend.
