Free Yourself: How to Save Thousands by Ditching PMI Today!

Owning a home is a dream for many, but the financial responsibilities that come with it can sometimes feel overwhelming. If you've purchased a home with less than a 20% down payment, chances are you're paying for Private Mortgage Insurance (PMI), which can add hundreds of dollars to your monthly mortgage payment. However, there's good news – you may have the opportunity to free yourself from PMI and save thousands of dollars in the process.

Understanding PMI

Private Mortgage Insurance, commonly referred to as PMI, is a type of insurance that protects the lender in case the borrower defaults on the loan. It's generally required for conventional loans when the down payment is less than 20% of the home's purchase price. While PMI allows many individuals to become homeowners with a smaller down payment, it can also add a significant amount to your monthly mortgage payment.

The Cost of PMI

The cost of PMI varies depending on the size of your down payment and your credit score. On average, PMI can cost between 0.3% and 1.5% of the original loan amount per year. For a $200,000 loan, this could mean an additional $50 to $250 per month on top of your mortgage payment.

How to Ditch PMI

There are several ways to free yourself from the burden of PMI and save thousands of dollars over the life of your loan. Here are a few options to consider:

1. Increase In Home's Value: If the value of your home has increased since the purchase, you may have reached the 20% equity threshold required to refinance out of the PMI. A professional appraisal can help determine your home's current value.

2. Make Extra Payments: By making extra principal payments on your mortgage, you can build equity in your home more quickly, potentially reaching the 20% equity threshold sooner than you think.

3. If you believe you've built enough equity in your home, refinancing your mortgage could be a strategic move. Your new loan-to-value ratio may be low enough to eliminate the need for PMI, and you might even have enough equity to buy down your interest rate and cover some closing costs.

4. Keep a Good Payment History: Some lenders may consider canceling PMI after a period of time, if you have a solid payment history and can demonstrate that you pose a low risk of default. This will vary by servicer, and most will require a minimum of 5 years in the loan and just over 20% equity as evidenced by an appraisal. It does not hurt to call your servicer to ask if dropping PMI is an option assuming you meet all of their criteria. 

Consult with a Professional

Every homeowner's financial situation is unique, and it's essential to discuss your options with a competent mortgage professional who is well-versed in the nuances of PMI. By reaching out to a knowledgeable mortgage broker or licensed loan officer, you can gain valuable insight into the best course of action for your individual circumstances.

At KMH Lending Team with Stone Bridge Mortgage, we understand the challenges homeowners face when it comes to managing their mortgage payments. Our Team of experienced mortgage professionals are dedicated to helping you navigate the complexities of PMI and find the most cost-effective solutions for your mortgage needs. Contact Kevin Hall today to discuss your specific situation and take the first step towards freeing yourself from PMI and saving thousands of dollars.