When Can I Eliminate The PMI Or MI?

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Anna 'Banana' Kruchten is hosting an ActiveRain contest this month titled "FAQ Break Into Summer Organized Contest" in which she is challenging us to write 5 new posts answering 5 consumer FAQ's.  As I have stated on my previous blogs in this challenge, this is an easy one for me.  There are at least twice that number of questions I am asked on a regular bases by consumers.  I have already posted three blogs about the most FAQ I am asked from consumers "What Do I Need To Do To Get Pre-Qualified For A Mortgage?""Why I Have To Pay Points?", "What Is PMI/MI & Why Do I Have To Pay It?"  The fourth blog is a natural follow up question to the third question I previously blogged about.

When Can I Eliminate The PMI Or MI?

I can't blame Borrowers for wanting to know when they can get rid of PMI or MI after seeing what it costs them each month.  It is easy to see why they would want to eliminate PMI/MI as quickly as possible. 

On a Conventional Mortgage if the Borrower makes the minimal down payment, and has good credit scores, they can expect to see a PMI payment of about $60 to $75 per month for each $100,000 they borrow.  On a FHA Mortgage if the Borrower puts down the minimal down payment of 3.5% their MI payment will be about $70 each month per $100,000.

Private Mortgage Insurance (PMI):  On Conventional Mortgages can be eliminated in a couple of ways:

  • By paying down the principle balance on the mortgage to 78% of the beginning loan amount, the PMI payment will automatically be eliminated, or
  • Once the principle balance has been paid down to 80% of the beginning loan amount, the Borrower can request a new appraisal of the property, and if property value has not decrease, the Borrower may request the PMI company to eliminate the PMI.  Elimination at 80% is not an automatic approval, depending on payment history the PMI Company could deny the request.

Note:  PMI Companies may require the Borrower to pay PMI for two years or more before granting a request to eliminate the PMI.

Monthly Insurance (MI):  On a FHA 30 Year Fixed Mortgages can also be eliminated, but ONLY if the Borrower made a 10% or more down payment when they first obtained the loan.

If the loan is for 90% of the purchase or appraised value (whichever is less) the MI will be eliminated after the Borrower has had the mortgage for at least 11 YEARS,  AND (not or), paid down the principle balance on the mortgage to 78% of the original loan amount.

It does not matter what the property values are during the 11 years the MI payment will remain until the principle balance has been paid down to 78%.  Also the MI payment will remain even if the principle balance has been paid down to 78%, until the full 11 years are completed.  BOTH the 11 years and the 78% principle balance reduction have to be met, NO exception.

If the loan is for more than 90% of the purchase or appraised value (whichever is less), the MI will be on the loan for the life time of the term of the loan.  In other words if the loan is for more than 90%, the MI will never be eliminated.

The only way to get rid of the MI if the FHA loan was for 90% or more of the appraised or purchase value, is to refinance out of the FHA loan into a conventional loan.  If the property appraises high enough for the new refinanced loan to be 80% or less of the appraised value, then there will not be PMI on the new refinanced loan.

Guidelines can change when it comes to the elimination of PMI or MI, so a trusted Loan Originated should always be consulted for updated information and advice.

 

 

*******************************************************************************************************

 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

close

Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Debbie Reynolds 06/17/2017 05:00 AM
  2. Gabe Sanders 06/24/2017 11:43 PM
  3. Ginny Gorman 06/28/2017 05:04 AM
Topic:
Mortgage / Finance
Location:
Connecticut
Groups:
Realtors®
1st Time Buyers
Real Estate Rookie
Be The Best In Your Field
ActiveRain Contests
Tags:
pmi and mi

Spam prevention
Show All Comments
Ambassador
1,495,195
Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

George Souto  Great information for buyers as well as agents to convey the info  I am asked this question you have explained so well .

Jun 15, 2017 04:48 PM #1
Ambassador
1,993,883
Debe Maxwell, CRS
www.AtHomesCharlotte.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

I've never understood the life-of-the-loan rule with FHA MI - those are the exact folks that could use the release from having to pay it, George! I did read some notes today that NAR is making a push to have this eliminated - or at least changed to the same 78% standards as PMI. We shall see!

Jun 15, 2017 05:24 PM #2
Ambassador
3,167,196
Jeff Dowler
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude - Carlsbad

Hi George

Great set of questions and this one is another winner. I have directed buyers to their lenders a number of time on these questions.

Jeff

Jun 15, 2017 06:21 PM #3
Rainmaker
3,142,145
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

I call my clients when I believe they could be at that threshold

Jun 15, 2017 08:34 PM #4
Rainmaker
2,448,292
Sally K. & David L. Hanson
Keller Williams 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce - Short Sale

  We have an eye on those folks we have sold homes to that maybe jhave crossed the equity line....cheers to this post !

Jun 16, 2017 12:10 AM #5
Rainmaker
965,020
Kat Palmiotti
Grand Lux Realty, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

I didn't realize an FHA loan MI payment could be eliminated at some point if the borrower put down 10%. Interesting information.

Jun 16, 2017 03:45 AM #6
Rainmaker
1,244,322
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good Morning George - there are many condidtions and you have given us a good explaination of how PMI works.

Jun 16, 2017 04:18 AM #7
Rainmaker
3,681,637
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Good morning George.  Excellent information for anyone currently paying either PMI or MI.

Jun 16, 2017 05:14 AM #8
Rainmaker
1,299,118
Sandy Padula and Norm Padula, JD, GRI NMLS#1483386
Realty One Group - Carlsbad, CA
Presence, Persistence & Perseverance

Excellent post; Thank you, George Souto You put together a super reference source for us to share with potential buyers.

Jun 16, 2017 06:10 AM #9
Rainmaker
2,537,537
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning George. I think you have really explained this well here. Good job.

Jun 16, 2017 06:50 AM #10
Rainmaker
1,882,422
Nina Hollander
RE/MAX Executive | Charlotte, NC - Charlotte, NC
Your Charlotte/Waxhaw/Fort Mill Area Realtor

Now this is a great topic, George. Too many homeowners with PMI believe it automatically goes away or they have an automatic right to have it go away. They are always shocked to find out that this is not quite so.

Jun 16, 2017 12:52 PM #11
Ambassador
2,422,051
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi George - That's a great topic, of interest to pretty much everyone paying PMI. Your explanation is very helpful.

Jun 16, 2017 03:37 PM #12
Rainmaker
1,230,230
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Hi George Souto, this is a great post. It's a question many borrowers who have PMI do ask. Thank You for sharing your knowledge. 

Jun 16, 2017 04:48 PM #13
Ambassador
3,112,092
Debbie Reynolds
Berkshire Hathaway HomeServices PenFed Realty, Your Clarksville Real Estate Professional - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

Good information George adn I have many clients ask this question. Unfortunately on FHA most are financing 96.5%so MI is with them to the end.

Jun 16, 2017 06:31 PM #14
Rainmaker
2,333,741
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale - Probate Broker

George Souto - when I see my clients mortgage insurance payments it makes my stomach ache.  Out of this world - $700+ a month.  I've recently suggested clients get an 80% conventional first, 10% second and borrow the additional money from their 401K account for the balance of what they need for the 10% down and closing costs.  The numbers work out much better, in most cases.  Great informative post! Thank you. 

Jun 16, 2017 06:59 PM #15
Rainmaker
659,663
Carol Williams
U.S.: I specialize in helping agents who have been in the business 2 years or less create a thriving business. - Wenatchee, WA
"Customized Mentoring & Marketing Services"

Hi George,
Great subject!  Thanks for sharing.  I didn't know about the 11 year rule on MI.  

Jun 17, 2017 06:16 AM #16
Rainmaker
410,946
Hella M. Rothwell, Broker/Realtor®
Carmel by the Sea, CA
Rothwell Realty Inc. CA#01968433 Carmel-by-the-Sea

First time home buyers really need to be familiar with what they are getting into. Often they look at just the down payment.

Jun 17, 2017 08:31 AM #17
Rainmaker
1,627,542
Ginny Gorman
Phillips Post Road Realty ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in North Kingstown RI and beyond

George, a great reminder for letting our clients know they can get rid of MI & PMI with the right moves...good way to let customers know.  thanks

Jun 23, 2017 03:52 AM #18
Rainmaker
3,050,912
Dorie Dillard
Coldwell Banker United Realtors® ~ 512.346.1799 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning George Souto,

I'm so glad that Gabe Sanders re-blogged your post as I missed it. Excellent explantion that is very helpful.  Many homeowners believe  PMI automatically goes away which of course is not true.

Jun 25, 2017 04:47 AM #19
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Ambassador
3,137,126

George Souto

Your Connecticut Mortgage Expert
Call Me With All Mortgage Questions
*
*
*
*
Spam prevention