Private Mortgage Insurance (PMI)

Private Mortgage Insurance is an insurance policy that a mortgage holder is generally required to purchase when the down payment on the home is less than 20% of the purchase price of the property. PMI is required by most lenders to protect against non-payment or default of the mortgage loan.

On a $150,000 mortgage loan the PMI may be about 5 percent (.005) of the loan amount or $750.00 per year--$62.50 per month, but premiums may vary.

The lender is required to provide information about the termination of PMI at the closing of a home purchase. There are some exceptions to the termination rule which include high risk mortgages, VA and FHA mortgages, and those mortgages negotiated before July 29, 1999. But a mortgage holder usually can cancel PMI when certain criteria is met. Generally, this is when the mortgage balance reaches 78% of the original purchase price or appraisal value at the time the loan is acquired, or when the mid-point of the loan term is reached. In fact the lender is required by federal law to end PMI when the outstanding mortgage balance reaches 78% of the original purchase price or appraised property value at the time the loan was begun.

At a time when an area’s real estate value is appreciating, and the value of a property has increased—a new appraisal may provide the basis to show that the property’s’ value has sufficiently increased, qualifying the original mortgage holder to discontinue PMI under the 78% purchase price rule.

In such a circumstance AMS Appraisals’ Certified Residential Appraisers can appraise your property to determine an updated value which may qualify your property for the elimination of mortgage PMI. AMS Appraisals provides a full range of appraisal services in Phoenix.

AMS Appraisals
Phone: 623-544-2221