Quick Guide To Removing PMI:
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For those with 20%+ equity now:
- If you have an FHA loan started before June 2013 — Your FHA PMI will drop off automatically when you reach 22% equity in the home *based on the original appraisal* (not the current value). The fact that the FHA only uses the value from your original appraisal can extend the PMI by years. Contact us to get an estimate on how long it will take for you to reach 22% equity so you can decide if it’s worth it to refi out of an FHA now loan or not.
- If you have an FHA loan started after June 2013 — Your FHA PMI is permanent. Contact us to look into refinancing away from FHA into a Fannie/Freddie loan with no PMI.
- If you have a conventional loan — You should be able to remove PMI now if you already have 20% equity. If you are happy with your current interest rate contact your current lender to get a new appraisal and remove PMI. (If you are unhappy with your current interest rate, need cash out, or would like to refi to a 15 year loan, contact us for more info.)
For those with 5-20% equity now:
- If you have an FHA, USDA, or conventional loan — Contact us today. It is a good idea to run numbers and see if refinancing to a Fannie/Freddie loan with no PMI will work. (Note: Good credit helps here).
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If your down payment was less than 20% of the purchase price when you bought your home, odds are you are paying a monthly mortgage insurance fee (sometimes called “private mortgage insurance” or PMI). Mortgage insurance is insurance designed to protect lenders against the risk of borrowers defaulting on loans.
As anyone paying mortgage insurance knows, it can be expensive and burdensome. But there is good news: Over the last year housing values all across the U.S. have been increasing. That means that many homeowners who are paying mortgage insurance now may have enough equity to refinance to a new, improved mortgage with no, or lower, mortgage insurance.
Is a refinance needed to get rid of PMI?
The answer is: It depends. If you are in an FHA or USDA loan now you normally need to refinance to a conventional Fannie/Freddie loan to get rid of PMI.
If you have a conventional loan now and have more than 20% equity, a refinance often is your best bet if you’d like to improve your interest rate or get cash out in addition to removing PMI. If you have more than 20% equity and don’t need cash out and can’t get a better interest rate you can usually contact your current lender to see what it will take to remove your mortgage insurance without a refi.
(There are also a ways to refinance to get rid of PMI if you just have 5-10% equity. Contact us using the contact form in the sidebar to learn more about that option.)
If you have mortgage insurance on your current mortgage get in touch with us by filling in the contact form in the sidebar. We can help point you in the right direction to reduce or remove that mortgage insurance and refinance to a better loan.