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PMI or Private Mortgage Insurance is normally
required when you buy a house with less than 20% down.
Mortgage insurance is a type of guarantee that helps protect
lenders against the costs of foreclosure. This insurance
protection is provided by private mortgage-insurance
companies. It enables lenders to accept lower down payments
than they would normally accept. In effect, mortgage insurance
provides what the equity of a higher down payment would
provide to cover a lender's losses in the unfortunate event of
foreclosure. Therefore, without mortgage insurance, you might
not be able to buy a home without a 20% down payment.
The cost of PMI increases as your down payment decreases.
Example: The cost of PMI on a 10% down payment is less than
the cost of PMI on a 5% down payment. Your PMI premium is
normally added to your monthly mortgage payment.
The decision on when to cancel the private insurance
coverage does not depend solely on the degree of your equity
in the home. The final say on terminating a private
mortgage-insurance policy is reserved jointly for the lender
and any investor who may have purchased an interest in the
mortgage. However, in most cases, the lender will allow
cancellation of mortgage insurance when the loan is paid down
to 80% of the original property value. Some lenders may
require that you pay PMI for one or two years before you may
apply to remove it.
To cancel the PMI on your loan, contact your lender. In
most cases, an appraisal will be required to determine the
value of your property. You will probably also be required to
pay for the cost of this appraisal. Another way of canceling
the PMI on your loan is to refinance and to get a new loan
without PMI.
If you have questions just ask! You may contact
Virginia Mortgage Bankers, LLC
for your PMI questions by email, phone or by appointment
in our
office.
Start now by filling out our secure online application for
mortgage loans! Call us at 804.282.8808, Monday through Friday from 9 a.m. to 5 p.m. Eastern time.
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