How To Remove PMI -Private Mortgage Insurance

How To Remove PMI or Private Mortgage Insurance from your monthly payment.

Removing PMI, also known as Private Mortgage Insurance, on either a FHA Loan or a Conventional Loan is our topic. If you want to know how your specific loan might go about taking steps to remove the PMI, I recommend you check out our Private Mortgage Insurance Playlist to help find what you’re looking for!

So what is Private Mortgage Insurance? “PMI” or “MIP,” is a required payment you must pay out to your Local Lender, or whoever you’re borrowing money from, in order to secure financial security between you and your Loan Officer. This is required unless you’ve contributed to a down payment of 20% or more. For more information on PMI’s or Private Mortgage Insurance be sure and click the video below explaining it!

So now that you’ve decided that you will need or want Private Mortgage Insurance, you might be curious on how to get rid of it. Be sure to click the timestamp below on how to get rid of PMI or MIP based on your current or planned loan.

So first, on a Conventional Loan, you can obtain PMI two different ways.

The first way is, buying or paying the Mortgage Insurance once you have the money or are willing to pay it off. So usually, after closing on your house, you will make around a 1.75% Payment upon closing, and sign off a monthly contract paying into the Private Mortgage Insurance. However, once you decide to contribute more money, which you will be if you’re paying your monthly mortgage, and pay off at least 80% of the house, your PMI will go away! This is because you’ve now proven yourself as trustworthy to your lender or loan officer and they can allow you to stop paying into the insurance.

Now the second way you can undo Private Mortgage Insurance is through the appreciation of value on the house. So for example, let’s say you initially closed on the house for $100,000, and over time it rose to a value of $130,000. Your PMI rate is typically a fraction of your house value, so instead of paying 0.85% of the monthly mortgage rate of $100,000, you can now re-evaluate your payments such that as long as you’ve paid off the 80% house value of $100,000, you will have it removed. However, in order to even begin this process, you will need to have been making on-time payments for the past 2 years, or else you will not be allowed to remove your Private Mortgage Insurance. Another thing is, don’t be afraid of asking your Local Lender questions on the process at hand, we’re here to help and want to see you succeed and happy!

Now for an FHA Loan, also referred to as a Federal Housing Administration Loan, things might not be as easy as for a Conventional Loan.

So, if you put down 3.5% - 5% down on your house upon closing, you will not be able to remove your PMI, or sometimes referred to as MIP, until the house is paid off fully. This means PMI will be the life of the loan. Of course, if you decide to refinance there will be the possibility that maybe your Lender can re-evaluate your loan and adjust the regulations accordingly. Now if you’ve put 10% or more down, you will need to make Private Mortgage Insurance payments for at least 11 years before you can remove it. This also follows the guidelines that a Conventional Loans follow considering that you’ve been making those payments on time for the past 11 years!

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0:00 Intro
0:37 How to Remove PMI on a Conventional Loan
2:30 How to Remove PMI on an FHA Loan

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[bebejesisoto]

Ty for info Ive heard by many even the broker Im going through with FHA its through the life of the loan unless I refinance?

[Elaw]

Hi Jen - I'm a 17 year mortgage vet and top producing lender. You should update this video as this info is wrong and or misleading. FHA PMI is for life and NEVER goes away. FHA states it is for LIFE. This can easily be googled to confirm.

Conventional MI : Majority of lenders WILL NOT agree to drop MI based on appreciation. This is a false hope clients should not put any weight into.

Its misunderstood that most homeowners believe their mortgage insurance will fall off after their home has increased in value so they have 20% equity. This is not the case. Homeowners are better off simply refinancing into a new loan to get rid of MI.

The loan documents clearly state that the principal loan balance must be paid down to 80% of the home value at the time of the purchase.
• This means value increase does apply

Example: If you put down 10% when you bought your home, then you need to have paid down your loan balance by another 10% to qualify for the MI to be removed.

• On a $300k loan @ 4.0% it would take 6 years for the loan to be paid down by 10% since the principal portion of the payment is only $432 a month.

• Calculation: MI would fall off when loan reaches $270k so you’d have to have paid off $30, 000 at $432 a month which takes 69 months or 6 years