What is PMI? When you buy a house there are four key cost components that are included into your monthly mortgage payment. The four components are commonly referred to as “PITI”. PITI includes the (P) – principal amount of the mortgage, (I) Interest on your new mortgage, (T) county taxes and (i) insurance. Now, we will now explain how… and when PMI is added to your monthly mortgage.
If you cannot afford to make a 20 percent down payment on a conventional loan – PMI, or private mortgage insurance protects your lender from loss in case of default. Having private mortgage insurance will allow you to make a significantly lower down payment than the required 20 per cent, and still obtain a traditional conventional financing.
You could be eligible to cancel your PMI coverage if specific lender guidelines are met, e.g., having no late payments and the overriding factor – having built at least 20 percent equity. You build equity quickly when… and if your property value increases or, if you make extra payments toward your principal balance. A wise investment!
To cancel your PMI contact your lender. You will be required to verify your home’s loan-to-value ratio verified by a professional certified appraiser. Your mortgage lender should assist you with other details concerning the verification process and your loan-to-value ratio.
When you are ready to buy or sell a home contact Adolphus Hawkes Realtors. We are here to help you make your dreams of owning a home come true!