Many homeowners know how costly PMI mortgage payments can be and seek ways to avoid them.  Some people hear that If you already have the mortgage, you could threaten to switch the loan to a different lender. If you are just getting the loan, negotiate. Tell them you won’t accept a loan that has PMI. Anything can be negotiated.  This is usually not the case and will normally never make it past the loan underwriter because it is a lender wide requirement.

PMI protects the lender in case your loan goes into default.  PMI is in place to protect the bank from the foreclosure process. Essentially the lender is paying the bank upfront for the costs associated with possible foreclosure.

The best know method for avoiding PMI payments is to have it removed is when you owe less than 80% of your home’s value.  This also can be done at the beginning of the loan if the borrower puts 20% down on the home.   Basically PMI is not required when the equity exceeds 20%.

Another lesser know method  to get PMI dropped is to get an up to date appraisal done on your home. If your home has appreciated in value (not likely) beyond the 20% of your loan you could negotiate getting the PMI dropped. Either that or put more money down on your loan.

This entry was posted on Wednesday, June 3rd, 2009 at 2:29 am and is filed under Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.