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Many Individuals Pay Private Mortgage Insurance Beyond When It Is Necessary

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.

Action Items:

  1. 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 initiated.
  1. 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

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