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What is PMI?
PMI / MIP Removal Savings
What is an Appraisal?
How is
Market Value Determined?
Who Needs An
Appraisal?
Home Appraisal
vs Home Inspection
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PMI Removal / MIP Removal
When Can I Cancel PMI /MIP?
You can ask your lender to remove Mortgage Insurance Protection (MIP) /
Private Mortgage Insurance (PMI) when A) your loan balance reaches 80% premium
of principal or its original balance or B) the appraised value of your home
is 20% or more of your principal pay balance.
Lets take a young couple example and add some more information. When they
purchased their new home the appraised market value was 180,000 and they
borrowed 171,000 (95% loan to value). Several years later the market value
is now 210,000 and the mortgage loan has been reduced to 165,000 (78% loan
to value). Since their loan is now below the 80% thresh hold for PMI /MIP,
our young couple may be able to eliminate this extra monthly "insurance"
charge. If you purchased your home AFTER July 1999, your lender is required
under federal law to inform when your loan balance reaches 78% of the original
balance.
Lets assume when they purchased their new home the appraised market value
was 180,000 and they borrowed 171,000 (95% loan to value). Three years later
the appraised value of the home is still 180,000 but our couple has applied
an inheritance of 30,000 to the outstanding balance reducing it to 141,000.
The new loan to value ratio is 180,000 / 141,000 = 78% and may qualify for
removal of PMI / MIP.
What Are The Steps To PMI / MIP Removal?
The first step should be to contact your lender and confirm that you are
paying PMI or MIP. Each lender will have their own unique procedures to
follow and any special steps will be spelled out in their instructions.
The Homeowner's Protection Act of 1998 requires that mortgage loans
originated after July 29, 1999 have their PMI cancelled A) automatically
when the equity position reaches 22% of the original value of the property,
or B) by request when the equity reaches 20% of the original value.
As you may have guessed from reading the above examples, the appraisal of
your home by a qualified State Licensed Appraiser is of critical importance
to the lender.
Generally, the lender will consider whether you have owned your residence
for more than 2 years and have made timely mortgage payments. PMI protects
the lender in case you default on your loan and a history of late payments
makes lenders extremely reluctant to remove PMI protection.
How Much Can I Save Each Month?
The amount you can save from removing PMI will vary depending on your original
loan amount and type of loan, but generally will be $35 to $60 a month based
on a 100,000 home with a 30 year fixed mortgage. A 200,000 mortgage loan
will typically see a $60 to $120 per month savings from PMI removal. That's
a savings of $400 to $1,400 a year for eliminating PMI insurance coverage
that is of no benefit to the home owner!
How Much Does A PMI Removal Appraisal
Cost?
A typical home appraisal for PMI removal will range from
$350 and $450. Please refer to our appraisal
fee schedule for additional information.
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