PMI Removal
Can you get rid of PMI with a new appraisal?
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Private mortgage insurance, or PMI, is a big cost for homeowners — usually thousands per yer. PMI is designed to protect the lender, not the borrower. In the event that the borrower is unable to make their mortgage payments and the house goes into foreclosure, the PMI will reimburse the lender.
Fortunately, you’re not stuck with PMI forever. There is a very common way to get rid of mortgage insurance and lower your monthly payments. The most obvious benefit of canceling mortgage insurance is the financial savings. Mortgage insurance can cost between 0.5% and 1% of your entire loan amount annually. For a $500,000 mortgage, that can equate up to $5,000 per year, or roughly $417 per month.
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If you have a conventional loan and your down payment was less than 20%, you’re probably paying for private mortgage insurance. If you refinance to get rid of PMI, the process will include a new property value to verify that your loan is below 80 percent LTV but closing costs and interest rate might end up costing you more. For homeowners with a conventional mortgage loan, you may be able to get rid of mortgage insurance with a new appraisal if your home value has risen enough to put you over 20 percent equity. Contact your lender and Amerappraise directly to learn about your options.
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* key contributor: Erik J. Martin, The Mortgage Reports contributor
What if my loan servicer won’t cancel PMI even after I reach 80 percent LTV?
First, check your numbers. Your loan servicer may be using your original purchase price to calculate LTV. You may need a new appraisal to show your home’s current value has increased since your original home appraisal or sales price. If you think your loan servicer violates the Homeowners Protection Act, report your experience to the Consumer Financial Protection Bureau.
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Home values have increased significantly in the past few years, you could pay for a new appraisal if your home’s current value has risen since you first purchased it.
An appraisal may cost as much as $650 or more depending on complexity. But the fee would be well worth it if your home’s current value shows you have 20 percent home equity — enough equity to cancel PMI on a conventional mortgage, which will save you money each month.
