When Can I Stop Paying Private Mortgage Insurance (PMI)?

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PMI … Fair or Foul?

If you’ve recently applied for a mortgage and were shocked to find out you have to pay for Private Mortgage Insurance (PMI) you may be inclined to exclaim, “That’s not fair!  I’ve been scrimping and saving and now you tell me I have to pay something else on top of mortgage payments!”  Let’s take a look at what PMI is about.  Private Mortgage Insurance protects the lender from borrowers defaulting on the mortgage.  Obviously, you have every intention to pay back the full amount but life is full of unexpected set-backs and challenges so it’s understandable that lenders want to protect their investments.  Wouldn’t you?  I don’t think any of us can say no.  Clearly, the added expense of PMI might disrupt your budget and may be tempted to cry foul just when you thought you had everything worked out to the last penny and now there’s suddenly yet another cost to add to the mix.  Try not to let it throw you off track.  Take a deep breath, recalibrate and move forward.  Home ownership is a huge step and no matter how frustrating the initial financial wheelings and dealings become, it will all be worth it in the end.

Getting to First Base

What’s the up-side for consumers?  If you are having difficulty getting to first base . . . putting more than 20% down on a house . . .  PMI could be the solution you’re looking for.  Let’s face it, most of us don’t have tens of thousands of dollars lying around just waiting for a great opportunity to come along.  It can take years to save enough money for a sizable down payment and with the escalating cost of Real Estate you may feel like you’ll never be able to get into a home of your own.  PMI can help you get into a home sooner and may even be able to help you secure financing and take advantage of low interest rates.

Short Stop?

Another thing to consider is that PMI is (usually) only required until you have reached 20% equity in your home . . . this can take several years but it will be worth it.  You’ll be building equity and enjoying pride of ownership, it’s a win-win situation.  Investing in your own home has been part of the American Dream since George Washington took his oath of office in 1789 and remains at the top of Bucket Lists until today.  Getting into your own home could be a short stop away even without a hefty downpayment and your PMI payments could be finished earlier than initially forecast.  How?  Just as life can throw us a curveball it can also bring an unexpected homerun and you may be able to refinance your home and cancel the PMI earlier than first imagined.

The Final Inning

In order to determine whether or not you can cancel your PMI, you’ll need to call your mortgage broker or bank.  They will walk you through the process.  It’s a good idea to discuss the cancellation process with them … you’ll need to make an official written request but if you speak to them first, you’ll save time in the long run. In most cases, you will be required to pay for a formal home appraisal. When you call the lender ask whether you can set up the appraisal or if it’s something they need to do. Lenders also carefully examine your payment history, so it’s important to have made your payments on time. Keep in mind that if you rent your home out, most lenders will require a higher equity percentage before dropping the PMI.

Once your request is approved, you will receive any pre-paid premiums in escrow.  This process can take a few months so be prepared to continue your PMI payments while the process is on-going.  In some cases, such as FHA loans, PMI cannot be cancelled … the only solution is refinancing the loan or paying it down fully.  There are some lenders that require PMI until 22% equity is reached so be sure to ask questions and read the fine print.

In the words of Yogi Berra, “It ain’t over till it’s over.”  So … don’t try to rush the process, financial institutions have their protocols and there’s little you can do to expedite the situation.  Above all . . . “keep your eye on the ball” and you’ll be able to enjoy homeownership for many years to come.


Contributed By:

R&J Mortgage

Corporate Office: 80-02 Kew Gardens Rd Suite 1040, Queens, NY 11375


R&J Mortgage & Loan Brokers Manhattan NYC  31 W 34th St. #7162, New York, NY 10001 https://rjcmortgage.com/  

Ready to lock-in the best mortgage loan rates in New York City Guaranteed? Call now for a free loan consultation. We provide lending services to residents of New York regardless of whether they have good credit or not. We offer income based and FHA loans as well. We have helped many who could not dream of attaining a mortgage secure a new home and fast. Contact us today and learn more.

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