The Smart Way to Remove PMI in Grosse Pointe

Many homeowners in Grosse Pointe purchased their homes with less than a 20 percent down payment, which often means paying private mortgage insurance (PMI).

PMI protects the lender rather than the borrower and increases the monthly cost of the mortgage.

Because home prices in Grosse Pointe are often higher than average, PMI payments can add several hundred dollars per month to a homeowner’s housing costs.

Fortunately, there are several ways PMI can eventually be removed.

1. Automatic Removal

Most conventional loans automatically remove PMI once the loan balance reaches approximately 78 percent of the original purchase price.

This schedule is typically outlined in the loan documents provided at closing.

Once the balance reaches that threshold, the lender is required to remove PMI.

2. Requesting Removal Based on Home Value

In many parts of Grosse Pointe, home values have appreciated over time.

If the value of the home has increased enough that the remaining loan balance is less than 80 percent of the home’s current value, homeowners may request PMI removal earlier.

Lenders usually require a professional appraisal to confirm the updated property value.

The homeowner typically pays for the appraisal, and there is some risk involved if the value does not come back high enough.

3. Refinancing the Mortgage

Another option is refinancing.

If the home’s value has increased or the loan balance has been reduced sufficiently, refinancing may allow homeowners to eliminate PMI entirely.

In some cases, refinancing may also improve the overall structure of the loan or reduce the interest rate.

Final Thought

Because home values in Grosse Pointe have changed in recent years, homeowners who purchased with smaller down payments may have more equity than they realize.

Reviewing your loan periodically can help determine whether PMI can be removed earlier than expected, potentially reducing the monthly cost of homeownership.

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What I Look at Before Recommending a Refinance

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When Refinancing Actually Makes Sense (And When It Doesn’t)