Private mortgage Insurance (PMI) I have on my mortgage loan. My loan is with Freddie Mac?

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Is there a way to have this taken off the loan that you know of or am I just screwed until housing prices go back up?

Most PMI are mandatory on loans if I do not put down 20%. I have about 15-18% in the bank and am wondering if I can get around this somehow through closing or other? I am aware of 90/10 type loans but understand that this gets me a much worse interest rate which is not desireable. thanks

10 Comments
  1. Reply
    gabby
    February 5, 2011 at 4:38 pm

    i think it should be (MIP)mortgage insurance premium(pmi- is when you have a conventional loan)- and will go away when you have 20% of the value, in equity(upgrades count too)

  2. Reply
    chatsplas
    February 5, 2011 at 5:04 pm

    You pay down equity until you have 20% ownership. You pay PMI because youdidn’t put down 20% at purchase and are a higher risk for defaulting. You can get a paid professional appraisal and if your equity is 20%, you get out of PMI. Best to buy with sufficient down payment to avoid extra costs of PMI and the added interest you pay due to low down payment.

  3. Reply
    Paul in San Diego
    February 5, 2011 at 5:10 pm

    PMI is required if your loan-to-value ratio (LTV) on your first mortgage is more than 80%. For example, on a $ 100K home, you would not have to pay PMI on an $ 80K first, but you would on an $ 80.1K first.

    Lenders require PMI to ensure that they don’t take a loss on a home with an LTV that’s greater than 80%. This is because, if you default on the loan, they will incur administrative and legal costs if they have to foreclose, as well as probably getting less than full market value when it either gets auctioned off or they sell it on the open market. If you do default and the lender takes a loss, the insurance company that issued the PMI makes up the difference.

    If you bought a house that has decreased in value and you originally bought it at more than 80% LTV (so you have to pay PMI), then there’s no way you can get out of paying the PMI, because the LTV will be even higher now. If the property value goes up to where your LTV is now at or less than 80%, you can then apply with your lender to stop paying the PMI. But, this is something you have to initiate. They won’t come calling you to let you know that you don’t have to pay that any more.

  4. Reply
    loanmasterone
    February 5, 2011 at 5:53 pm

    All the others got it right in some shape or form. The added thing I wanted to inform you about is that this is a tax deductible item based on your income. You might want to check with your tax consultant concerning this possible deduction and see if you are qualified for the deduction.

    I hope this has been of some benefit to you, good luck.

    “FIGHT ON”

  5. Reply
    Carol
    February 5, 2011 at 6:25 pm

    If you do not have the required 20% equity in the home, no, it will not be dropped.

    When you think you have the equity, you must pay the cost of a home appraisal to prove it – using an appraiser assigned by your lender.

    Actually, the bank may be more screwed than you.

  6. Reply
    hottotrot1_usa
    February 5, 2011 at 7:09 pm

    I recently got a loan, and went the 90/10 route. Actually it was 80% of value on the first loan, and 10% on the second. I plan to pay off the second as fast as I can. I avoided PMI and escrow. Its all a matter of negotiation. Call lots of different brokers and a few banks, and you’ll get lots of different deals proposed. Tell the brokers that you want to avoid PMI and see what they offer.

  7. Reply
    cmruffin1
    February 5, 2011 at 7:52 pm

    you can get a 80/20 loan. that will avoid it. but if you have that much to put down you maybe able to work something out with the mortgage company. shot me an email if you would like my help.

  8. Reply
    Amanda H
    February 5, 2011 at 8:16 pm

    You wouldn’t do a 90/10 loan– that makes up 100% and you have 15% down.

    You could do an 80/5 loan if you wanted too– the 5% portion would be quite small.

    However, I would just get a single loan for 85% because of less closing costs, and then if your house appreciates even just a little bit (enough to mean you only have 80% owing on it) you send an appraisal to your bank and they drop the PMI.

    Also– check with Bank of America. They dont charge PMI at all in my state.

  9. Reply
    ucla987
    February 5, 2011 at 8:47 pm

    You’re right, PMI (Private Mortgage Insurance) is required on “conventionally” financed loans where the LTV (loan to value) is greater than 80%. One option is to get “piggy back loans” that way you avoid the PMI charge and the other is to simply accept the additional insurance.

    I’m not a big fan of taking the Piggy Back option, because, as you stated, you pay a premium rate for 2nd mortages. PMI is ONLY mandatory for the first two years. If after the two year period your loan to value ratio falls below (in most cases) 80% loan to value, you can petition the morgage company (with a formal appraisal) to have the cost eliminated. With a second mortgage you cannot erase the costs of future interest without paying the expense to refinance all loans which can result in thousands more in costs.

    In your situation I would advise against taking a piggy back loan. PMI is calculated by risk levels; the lower your down payment, the higher premium of PMI. Since your LTV will be very close to 80%, your PMI factor should be close to .15% to .22%. This translates a monthly cost of roughly $ 25.00. While this is not tax deductible, it will be significantly less than the interest (and maybe the cost of refinancing later) on a 2nd mortgage. Piggy Back loans are good if and only if you have a very high loan to value and you need the additional tax write-off.

    Insofar as your first mortgage is concerned, the rate and/or costs will NOT be influenced by whether you have one or two loans. If you’re being told this, find another broker!

    Another note: If you plan on shopping around, do NOT release your social security number: each time someone pulls your credit, your credit risk score increases which will increase your costs. Just verbally give them your credit score.

  10. Reply
    ecollado2000
    February 5, 2011 at 9:41 pm

    Shop around w/ mortgage reps. There are actually new programs out there for up to 100% financing w/ no PMI. Another interesting note I heard recently is that the IRS is allowing home owners to take a deduction on PMI, which was not possible before. What area are you in? I’m in NJ and work w/ some great mortgage reps. Let me know.

    As for the credit comment someone made before, if you are shopping around for a home loan or auto loan you shouldn’t get your credit checked more than 2-3 times a month or your score could be impacted.

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