Miracles, emancipation, avoidance of tragedy, coming together as one people is what I think of when Purim arrives. Esther and Mordechai took action, working together with the divine blessings of God and saved the Jewish people while avoiding a catastrophe. Now what the heck does that have to do with Private Mortgage Insurance (PMI)? Well, first of all, the letters PMI are within the spelling of Purim. (This ain’t no gematria, but I’m trying). Can we read anything into this? If you shteig (learn hard), and think and look deep into what the possible connection means, you’ll find that it has absolutely no meaning unless you’re a mortgage banker/broker trying to be creative in writing an article. All joking aside, the tie in theme is really of freedom and taking action. Taking action to eliminate your PMI, if you have it, and the additional freedom of a reduced monthly payment along with the eventual emancipation of debt when you do. If you have mortgage insurance, I’ll assume you kind of know what it is. If you don’t know what mortgage insurance is, I’ll explain. What is mortgage insurance or PMI? When you put less than 20 percent down payment or borrow more than 80 percent of the appraised value of your home, mortgage insurance is required in some form or another. There are many types of private mortgage insurance. Borrower paid and lender paid are the usual two options. Lender paid insurance is built into the rate and therefore the rate is higher than monthly mortgage insurance options, but the overall payment is lower. There is no cancellation and you cannot remove lender paid mortgage insurance. The advantage is that you have a lower rate, and more tax deductibility. Monthly mortgage insurance can be terminated. It’s important to understand how it terminates so that you can make sure your payment drops and the monthly mortgage insurance is removed (even though it is supposed to be automatic at a certain point). Below are Fannie Mae’s guidelines for termination of PMI:
A clean mortgage (you pay on time) is an automatic termination of PMI. If the mortgage history exceeds the paid lates indicated below, then PMI does not get terminated (no exceptions):
1 x 30 days delinquent for the most recent 12 months
1 x 60 days delinquent for the most recent 24 months
There are three triggers for PMI termination:
The date the balance is first scheduled to reach or actually reaches 80 percent of the original property value.
The date the borrower actually requests the termination.
The date the PMI actually terminates.
When the borrower submits a written request for termination then the following applies:
One unit primary and second home seasoned between 2-5 years the LTV must be 75 percent or less.
One unit primary and second home seasoned over 5 years the LTV must be 80 percent or less.
If Fannie Mae’s minimum two year seasoning requirement is waived due to an improved property by the borrower then the LTV is 75 percent or less.
A primary 2-4 unit or an investment 1-4 unit property the LTV must be 70 percent of the seasoning of the mortgage.
The lender must order an appraisal to confirm the value.
If request for PMI termination is denied then the lender has 30 days to notify the borrower based on the date of either:
The written request from the borrower or the date the appraisal was received.
It’s all up to you to plan and cast your lot!
By Carl Edward Guzman
Carl Guzman, NMLS# 65291, CPA, is the founder and president of Greenback Capital Mortgage Corp. He is a residential financing expert and a deal maker with over 28 years of experience. He currently has 170 five star reviews on Zillow. Carl and his team will help you get the best mortgage financing for your situation and his advice will save you thousands! www.greenbackcapital.com [email protected]