How One Client Saved $3,500 in Future PMI Premiums!

When interest rates first started dropping back in December, I was letting clients know it might be a good time to re-finance their mortgage to lower the term or rate.

One of my clients, who has lived in their home for 6 years, still had a great interest rate, but they were sick and tired of paying their monthly private mortgage insurance (PMI) premium and wondered how they could get rid of it from their payment.

Most mortgage programs require a private mortgage insurance premium be added to a mortgage payment when a consumer is putting less than a 20% downpayment on a property.

Here's how I responded to them:

You've got a great rate. The only question I would have is how much is the PMI portion of your payment each month? There's no reason to be paying PMI, because loan balance is way under 80%. I would talk with (your lender) to see if you pay for an appraiser, approved by them, would they drop the PMI from your payment. If they aren't willing to do that, you may want to shop around.

You see, depending on what paperwork you sign at your closing, some lenders typically won't announce to you when you have 20% equity in your home. They want to keep receiving the monthly PMI premium. Now, with some recent rule changes, they may be required to remove the PMI once you get to the 78% LTV (loan-to-value) or in other words, when you have built up 22% equity in your home.

Well, I just heard back from my clients. They called (their lender) and the PMI has been eliminated. Their amortization schedule showed the PMI (by doing nothing) would not have been eliminated until Oct 2014, but their current principal balance enabled them to get rid of the PMI and save them $600 per year.

They picked up the phone and now they won't have to needlessly pay a total of approximately $3,500 in PMI payments over the next 70 months.

Congratulations! They took action and now have some 'new-found' money!

If you've owned your home for the past 6 years or longer, are still paying private mortgage insurance premiums (PMI) as part of your monthly mortgage payments and think you may have 20% or more equity in your home, then take action...pick up the phone and call me at (513) 615-1890 or email me: dan@danweis.com with any questions you have before you start talking with a lender. I'm here to help you.