Cancel your Private Mortgage Insurance

If you purchased your home with less than 20% down, you may be paying PMI. PMI is usually required by lenders because with less than 20% down you are considered a risky buyer more likely to default. In Denver, prices have gone up significantly the last two years. In May 2016 the average sales price was $451,429 and in May of this 2018 that jumped $89,195 to $540,624. A 20% down payment would have been $90,285 in 2016 and $108,124 in 2018. That is a lot of money!!

Many millennials were smart, they jumped into the market with 5-10% down conventional loans.

Once your loan to home value reaches 80%, you can contact your mortgage company to cancel your PMI. They will not identify this, so you will have it initiate the change. Each mortgage company is different, but there should be a place on their website to request to cancel your PMI. Once you initiate the process, they will require an appraisal ($700) or a broker price opinion ($100) to verify your home’s value before they drop the PMI.

Unsure of your homes value? Please contact me for a free broker’s price opinion before you pay for an appraisal to make sure you are eligible to drop your PMI.

Example 10% down loan ’16 = $406,287   ->  Loan balance ’18 = $400,000, Purchase price ’16 = $451,429    -> Value of home ’18 = $540,624 = 75% loan to value in 2018 for the average home in Denver purchased in 2016 FHA If you purchased your home using an FHA loan with 3.5% down, you are required to pay PMI for the life of the loan. If you put 10% down, your PMI will drop off after 11 years for FHA loans. This is a huge disadvantage of purchasing using FHA financing. Refinance Another way to drop PMI is to refinance. However, interest rated have gone up from about 3.75% in May 2016 to 4.75% in May 2018. Due to the 1% increase in interest rate, it does not make sense for most people to refinance right now. Purchasing with less than 20% down If you are considering purchasing a home, but are waiting until you have 20% down… STOP. As you can see, home values are appreciating quicker than you could possibly save money for a down payment. Jump in now! You may have to pay PMI for a few years, but as you can see above it can be cancelled when your home value increases.