Detroit Real Estate

Remove your PMI

With the current Metro Detroit area housing market in disarray many homeowners are going to be forced to stay in their homes.  They can't refinance out of PMI in most cases because home values have fallen.  So homebuyers that have PMI want to know how to get out of it.  PMI is Private Mortgage Insurance which protects the lender if you default on the loan.

1. 78% rule - one you pay down the principal balance down to 78% of the original sales price your primary mortgage insurance (PMI) should automatically be stopped by the lender.  Because of the Homeowners Protection Act of 1998 once you have 22% equity in the home your PMI should be cancelled.  This only applies to mortgages that originated from 1999 and after.  These rules do not apply to FHA or VA mortgages or mortgages with lender paid PMI.
2. 80%  - if you have 20% equity in the house you can ask your lender to remove the PMI.  This is one section people get confused on.  Even I was confused as a mortgage person.  I called up my lender and was very upset that they would not remove it from my mortgage loan.  The lender does not have to cancel your PMI.   Also it does not apply if your house just goes up in value.  The lender does not have to cancel PMI.  there usual guidelines is that there has to be some structural improvement such as an addition to increase the value.  Normal price appreciation through a rising real estate market won't get your PMI cancelled.

If your mortgage started before 1999 the lender does not have to cancel your PMI.  The only way to get out of the PMI is to refinance your home.  But it never hurts to call your lender to find out how or when your primary mortgage insurance (PMI) will be stopped.

Good luck.   I have about a year left on one of my rental properties

Russ Ravary Your Wayne County Realtor

Wayne County real estate blog