Hazys Quick Tips #1 (Giving PMI the Boot!)
Private Mortgage Insurance (PMI) payments are a reality, and a true pain, for many homeowners today. Those buyers who couldn’t afford a 20 percent down payment on their home are stuck with PMI payments until they are able to reduce their principal balance to 80 percent or less of the original loan amount. Overall, this is a rather simple and straightforward concept but, there is something many homeowners may be able to take advantage of right now.
For those homeowners who have been living in their current home for a year or more, you may have an option available to you that can save you a significant amount of money each month. Given the substantial increase in home values over the past couple of years, a homeowner may be able to take advantage of a new appraisal on their home. A mortgage company may permit you, under certain circumstances, to request a new appraisal on your home which can result in the removal of PMI payments. This removal of PMI can be made possible if a new appraisal reflects a better loan to value (LTV) ratio.
Mortgage companies will have a set LTV ratio that must be satisfied for the removal of PMI when done in this manner. It is best to contact your mortgage company and ask them for their specific policy so you can better determine if you may be able to utilize a new appraisal to remove your PMI payments. Removing your PMI can save you hundreds of dollars each year for several years. It is worth spending the time talking with your mortgage company about your desire to remove PMI and what options may be available to you.
Keep in mind that you will be responsible for the cost of a new house appraisal. So, it is best to do your homework. Check your current LTV ratio and compare that to the needed LTV ratio to remove PMI. You may find that investing a few hundred dollars in an appraisal can save you thousands in PMI payments. This can really provide you with more breathing room in your budget, which is always welcome.
Simply put, money that you save is really like receiving a raise that you don’t have to pay taxes on. So do yourself a favor and make that phone call to your mortgage company and see if you can give yourself that much needed raise!
Until next time.