When my husband and I purchased our home in Ridglea Hills in 2015, we knew we had our work cut out for ourselves. The layout was fantastic and the location was amazing, but the home needed work. Instead of putting down the standard 20% on our conventional mortgage, we decided to put down less to save our cash for the cosmetic updates that the home so desperately needed. We were still comfortable with our monthly payment, even though we were paying PMI every month in addition to our principal, interest, taxes, and insurance.
A quick google search will tell you that PMI is:
When a borrower makes a down payment of less than 20 percent, the lender requires the borrower to buy private mortgage insurance or PMI. This protects the lender from losing money if the borrower ends up in foreclosure. PMI also is required if a borrower refinances the mortgage with less than 20 percent equity.
PMI fees vary from around 0.3 percent to about 1.5 percent of the original loan amount per year, depending on the size of the down payment and the borrower’s credit score.
Typically, you pay the PMI until you reach 80% equity in the house. We are still paying our PMI, but were surprised to find out that you may be able to eliminate the need for the mortgage insurance early. In our case, as with most areas of DFW, the values in our neighborhood have increased steadily over the last 3 years. In combination with an increase in market value as well as the updating that we completed, we felt confident that we have reached that 80% equity. An analysis of our neighborhood confirmed our value, so we reached out our mortgage company.
A quick phone call later, our mortgage company confirmed this might be an option for us and let us know we should receive a letter in a week or so confirming our eligibility.
We got the letter and there are some requirements that our lender has in place:
1. The loan must be two years old for cancellation requests
2. The loan must not have been more than 30 days delinquent during the previous 12 months or 60 days delinquent during that last 24 months.
We were all good there so there are a few more hoops to jump through before being approved. They gave us these options:
1. We needed to obtain a full appraisal based on current value. The appraisal must be ordered by the mortgage company.
2. They set the minimum amount of the appraisal value and said the fee was $375 for this.
3. You can send the remaining principal to reduce your current LTV to 80%.
We decided the $375 was well worth the thousands of dollars in saved PMI payments over the next few years, so we chose that option.
It was a very easy process, and while every lender is different, we were surprised at how easily we were able to get rid of this extra expense every month.
If you would like our help to preliminary look at comparables to see if this might be an option for you, please let us know. We are happy to help in any way!
Brooke
