Private mortgage insurance (PMI) is an insurance policy required by mortgage companies to cover their losses if a Melrose MA home owner fails to pay their loan. When the mortgage company goes to sell a property, they are unlikely to recoup the total amount owed on the mortgage. PMI applies to first mortgages where the property owners are borrowing more than 80% of the sale price of the property. There is ordinarily a lump sum PMI fee due at closing and monthly fees based on a percentage of the loan amount. Melrose MA financing PMI definition and recommendations on eliminating PMI are detailed below.
PMI percentages differ based on the type of loan. Melrose MA home buyers should get a quote from a mortgage professional to obtain accurate calculations and understand the impact that it will have on anticipated mortgage payments. Rates can also change from time-to-time, so be sure to get current figures when you are evaluating your ability to purchase a home. Once you complete your home purchase, the PMI rate for that specific mortgage will remain the same for the life of that mortgage. With certain mortgages, such as FHA, you may be entitled to a refund of a portion of the up-front PMI charged at closing if you refinance within a certain period of time.
Recommendations on Eliminating PMI
Recurring PMI charges will typically disappear when the mortgage is paid down to 80% of the original home value. Most lenders allow removal of PMI a few percentages earlier if prompted by the homeowner when that percentage mark is attained. Refer to your closing paperwork for the percentages that apply to your mortgage. In an increasing real estate market, homeowners can also order a new appraisal (from a company approved by the mortgage company) to illustrate that the value of the home has increased and that you may have therefore reached the 80% mark earlier than expected.
Melrose MA Financing PMI Definition
Most home buyers are unable to provide a 20% down payment and subsequently cannot avoid PMI. By understanding how PMI works and how to eliminate it, Melrose MA home buyers can save significant money. We hope that you found this Melrose MA financing PMI definition useful and will be able to use the recommendations on eliminating PMI.