Many people continue to pay private mortgage insurance (PMI) long after
it is no longer required by the lending institution. Buyers who make a down payment of less than 20% of the home's
purchase price usually are required by the lender to carry PMI—which costs
about $500 per year.
Once 20% of the home's value as stated in the mortgage papers is paid
off, PMI no longer needs to be paid.
- The lender
may not inform the homeowner that they are no longer obligated to pay for
PMI. Instead, the homeowner or their advisor will need to keep track of
the mortgage balance, to determine when the amount dips below 80% of the
home's purchase price or the appraised value at the time of purchase, if
these amounts are different. At
that time, a request that the PMI should be cancelled needs to be
- Even if the
loan amount is still more than 80% of the home's purchase-date value, some
homeowners may be able to stop buying PMI if the home has appreciated.
However, an appraisal may be needed in order to prove to the lender that
the remaining mortgage balance is now less than 80% of the home's higher
value. This cost is usually borne
by the homeowner.
For further information, contact Louis P. Stanasolovich, CFP™ at (412)
635-9210 or mailto:email@example.com