If you’re on the market for a mortgage, terms like interest rate, PMI, APR and closing costs are swirling around your brain. One in particular, PMI, comes with a lot of details.

What Is PMI?
When you take out a conventional mortgage with less than 20 percent of the purchase price as a down payment, you must pay PMI or Private Mortgage Insurance. Private Mortgage Insurance protects the lender if you stop paying your mortgage—you pay the insurance premium for their protection should you default on your loan and they need to foreclose on the home. Fortunately, there are a few ways you can cancel PMI that we’ve outlined below.


With all the following ways to cancel PMI, the lender can deny the request if your home value has fallen below the purchase price, you are not up to date on payments, you’ve missed payments recently or you have a lien or second mortgage on the property. In addition, some lenders have seasoning periods you must wait before cancelling PMI, usually two to five years.

Pay Down Your Principal Loan Balance
When you’ve paid down the principal balance on your mortgage to 80 percent of the original purchase price, you can request the lender cancel your PMI. Once your principal balance reaches 78 percent of the home’s value and you are current on your payments, your lender is required to automatically cancel the PMI, according to the Homeowners Protection Act.

Build Equity
If paying your loan down to 80 percent of the value is a long time away, you can request to have your PMI removed if your home’s value has risen by 20 percent. This brings your principal loan balance to 80 percent or less depending on the appreciation. You must ask the lender to remove in writing and they may require an appraisal. Be sure to get a feel for home prices in the area before moving forward, as an appraisal can cost anywhere from $300-600.

Refinance
If the value of your home has increased, you may be able to refinance your mortgage without PMI. Be sure to factor in the cost of refinancing to guarantee refinancing does not cost more than your PMI.

Improvements
Though this route may be more expensive upfront, adding improvements to your home—like an additional bedroom or bathroom—can raise your home’s value. If your home’s new appraised value is more than 20 percent of the purchase price, you can request to cancel your PMI.We hope these options help you say goodbye to PMI!

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Wishing you a happy, healthy New Year!!!

 

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There’s a common misconception floating around about flood insurance. Many homebuyers are under the impression that flood insurance is only necessary for properties near the water or at a low sea level with a recent history of floods. Federal law only requires flood insurance in high-risk areas, but lenders often require it even in moderate and low-risk areas. We’re going to explain why flood insurance is a necessary investment for every homeowner.


Waging your residence on the “chance” that it won’t flood in the lifetime of the loan is riskier than you may think. According to the Information Insurance Institute, “90 percent of all natural disasters in the U.S. involve some type of flooding[…]and 20 percent of all flood claims are filed in low to moderate flood risk areas.” You don’t want to chance your place of shelter on the weather. Home damage from floods comes in many forms, including mudslides, water from storm/hurricane damage, broken water mains, faulty drainage systems and snow melt.If there is a flooding incident in your home, you want to guarantee you have funds to bring your home back to its pre-flood condition, and neither Federal Disaster Aid nor homeowner’s insurance is going to cover it. Flood insurance is the only policy that will cover everything you need to get your life back on track post-flood without emptying your bank account. Every policy is different, but flood insurance generally covers appliances, flooring, essential home systems like A/C, personal property and even art.It doesn’t matter if the last flood was a week ago or a thousand years ago, flood insurance is for every homeowner that wants to protect their investment and their home.

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