How to Reduce Your Mortgage PMI


Private mortgage insurance is a percentage of the loan paid to the lenders as a way of covering them incase you default. Most people pay more monthly payments than they had expected; most of this goes to funding PMI. The benefit to the borrower is that the down payment does not have to be 20% of the value of the home. This is an advantage as you can get the home you want with the little down payment you have but you will pay more with PMI as part of your monthly payments. You can have your PMI reduced by doing the following:

Calculate the amount of mortgage loan remaining. This will help you get your LTV with ease. LTV is the percentage value of the remainder of the loan compared to the value of the home. In other words, you will need a current appraisal of the value of the home. You will divide the remainder of mortgage loan you have to pay with the value of the home to get your LTV. If you are at the point where the percentage value is less than 80%, your lender will not need PMI payments from you. This will totally eliminate PMI from your payments. You can calculate your LTV as often as you can an justify the reduction of PMI rates since they have to go down with the reduction of mortgage loan.

When you are satisfied of the figures, call your lender and tell him that the amount you owe them is less than 80% and you should not be paying PMI anymore. The removal of PMI is within the discretion of the lender. Sometimes, the lender will not remove it even when you have reached the 20% mark. This may be because of reasons such as the loss of credibility that makes you a high risk borrower. If you do not have a bad credit record in the past, you have the right to have PMI removed. Those high risk clients can talk lenders into reducing their PMI. High risk borrowers are those who default on the payment of their monthly loans.

Another way of reducing your PMI is paying off a lot more as down payment. You may not be able to escape PMI if you do not have more than 20% as down payment, but you can get a lower rate of PMI if you pay as much as you can as down payment for your mortgage loan.

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