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  • Writer's pictureJosh Taylor

Say Goodbye to PMI

Navigating the PMI Exit Strategy: A Homeowner's Guide

Private Mortgage Insurance, or PMI, might feel like that lingering guest overstaying their welcome in your financial home. But worry not! We've got a laid-back plan to bid adieu to PMI and enjoy some extra cash in your pocket.

Understanding the PMI Game

First things first, let's understand the PMI concept. If you made a down payment of less than 20% when you bought your home, you've probably been dealing with PMI – that extra monthly charge attached to your mortgage. But fret not, it's not forever.

When Does PMI Bid Farewell?

According to the Homeowners Protection Act of 1998, PMI is required until your loan-to-value ratio (LTV) hits 78%. Translation: When your remaining mortgage balance drops to 78% of your home's original purchase price, PMI disappears.

Your PMI Escape Routes

  1. The Waiting Game: You could just chill and let the law do its thing. The act mandates that lenders must automatically cancel PMI when your LTV hits 78%. Alternatively, if your loan follows a 30-year schedule, PMI gets canned halfway through - that's at 15 years.

  2. The 80% Magic Number: You can be more proactive by reaching an 80% LTV. This means your remaining mortgage balance should be 80% of your home's original value. Just drop your lender a note requesting PMI removal, and you're on your way.

  3. Accelerate Equity: Want to speed things up? Pay down that mortgage balance quicker. Larger payments mean more equity and less PMI. It's like a "get out of PMI jail" card.

  4. Refinance Your Way Out: When interest rates wink at you, consider refinancing. This can lead to a lower loan-to-value ratio and - ta-da! - PMI is history. Plus, "piggybacking" with a home equity loan can do the trick too.

  5. Appraise and Rejoice: If your home's value has soared, a new appraisal might show you've hit that 20% equity mark. Say hello to a PMI-free life!

  6. Home Upgrade Trick: Adding value to your home can push you towards the 20% equity goal. A renovated kitchen, extra bathroom, or other upgrades can make your home worth more, which means less PMI.

Expert Advice: Balance is Key

While the PMI party isn't the most fun, don't let it consume your finances. Financial experts suggest keeping some savings for rainy days. Before diving into your savings to ditch PMI, consult a financial adviser to make sure you're making a wise move.

The PMI Journey: A Casual Approach

So there you have it, the chill way to tackle PMI. No need for superhero capes or dramatics. Just follow these steps, and you'll be saying "adios" to PMI in no time. Your wallet will thank you!

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