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I had ten percent equity when we purchased. Of course, now we are underwater by about $150k due to the Las Vegas housing market. What does PMI actual do? It's an additional $300 a month and I don't fully understand its purpose. I understand it will go away if we reach 20% equity which will take a long, long time to get there right now, or after seven years, it will simply fall off. |
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Private mortgage insurance is extra insurance that lenders will typically make borrowers pay for if they obtain a mortgage with a low down-payment. You're paying it because your original down-payment was only 10%. PMI is usually not required with 20% or more down. The "20% equity" statement isn't quite right, since this number floats along with the market price. You have the right to request cancellation of the PMI when your loan balance reaches 80% of the purchase price or 80% of the appraised value of the house at the time the mortgage was obtained, whichever is less. Typically you must request that it be cancelled at this point. They must cancel the PMI when your loan balance reaches 78% of the above value (77% if it was a "high-risk" loan) or halfway through the amortization period of the loan, whichever is earlier. These figures assume that you haven't been delinquent with payments. If you have, then other rules apply. I don't know if the rules change if you have the property re-appraised. |
