PMI is one of those acronyms that many novice borrowers pretend they understand, usually with a smile and a nod. Don’t make this costly mistake! Although you might not be able to avoid PMI initially, understanding how to ditch it ASAP could save you a ton of money over the life of your loan.
What is PMI?
PMI stands for private mortgage insurance. In most cases, borrowers pay a monthly premium to cover the cost. This premium is usually added to your mortgage payment.
PMI is designed to protect the lender if you can’t make your monthly mortgage payments. It usually applies to conventional loans in which the borrower’s down payment is less than 20 percent.
The First Step To Saying Goodbye to PMI
Have you missed more than one mortgage payment in the past 12 months? If so, PMI is here to stay for a while. Have you missed more than two mortgage payments in the past 24 months? You’re looking at the same situation.
If your monthly mortgage payment includes PMI, you can bid it a fond farewell by paying your mortgage on time. There are no exceptions to these guidelines, so prioritize your mortgage payment!
Three Triggers for PMI Termination
There are three ways to get the PMI termination process in motion. We call these “PMI Termination Triggers,” and they are listed here:
- Trigger #1: The written date, according to your mortgage paperwork, that your PMI is scheduled to end.
- Trigger #2: The date that your mortgage balance is anticipated to dip below 80% of the original property value.
- Trigger #3: The date that you provide a written PMI termination request.
Applying for PMI Termination
If you are planning to submit a written request for PMI termination, there are a few things you need to know. If the property in question is:
- A one-unit primary residence or second home, it must be seasoned for between two and five years with a loan-to-value ratio of 75% or less. Alternatively, the property can be seasoned for more than five years with an LTV of 80% or less.
- A primary residence with between two and four units or a one-unit investment property, the LTV must be 70% or less regardless of seasoning.
The lender must order an appraisal to confirm the property’s value. If the borrower’s PMI termination request is declined, the lender has 30 days to let them know.
Contact MortgageDepot Today!
PMI confusion might make your head spin, but MortgageDepot can calm the chaos. Contact us today to learn how to say goodbye to PMI!
Connect with one of our loan consultants to learn more.
Have questions or need help?
Call us now at 800-220-LOAN
Request a call back or email us your questions!
