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Avoiding PMI - Mortgage Insurance

In addition to their Articles dealing generally with the nature of their services, the real estate professionals will discuss different specific "Topics" of interest to buyers and sellers from time to time.  These articles are indexed in the Articles Library for your review.

Author, Jay Westrick is Manager of the Residential Appraisal Department at O’Connor & Associates. He is a Texas State Certified real estate appraiser. (Lic. #Tx 1327601-R). You may contact the O’Connor & Associates Residential Appraisal Department at (713) 686-9955.

Can and how do I remove PMI (Premium Mortgage Insurance)?

PMI can be removed when your current outstanding loan to value ratio is lower than 80%. Every bank has minor variations on how to remove PMI but most require contact by you to initiate the procedure. Loan to value ratio is not static. It changes as you own your home. There are two ways that the loan to value ratio changes over the lifetime of your loan. The first way the loan to value ratio changes is when the outstanding balance on your loan diminishes as you pay the loan. It usually takes about 5 years of home ownership to diminish the outstanding balance by 10%. The second way the ratio changes is when your property increases or decreases in value. The loan to value ratio is obtained by dividing the current outstanding balance of the loan by the current value of the property.

What does this mean to me?

If you have purchased a home one or more years ago, you might qualify to lower your payments by eliminating PMI. The Greater Houston residential market has seen prices of homes rise in the past year. The Houston Chronicle states that the median home price for Houston has risen 10% in the past year alone. If you have refinanced or have a mortgage payment, check your PMI. You may be paying for what you don’t need.

How do I proceed?

Check you mortgage statement. If you are paying PMI it will be stated there. If you are paying PMI, roughly calculate the loan to value ratio. On your monthly mortgage statement your current outstanding balance will be stated. Divide your current outstanding balance by the estimated current value of your home. To obtain a free, rough estimate of your value call the O’Connor & Associates Residential Appraisal Department.

Once you have established that your loan to value ratio is below 80%, then call your mortgage company and ask them how to proceed with having your PMI removed from your mortgage. Follow their instructions. Usually they will require a full appraisal of your home.

Your independent appraiser is looking out for your best interest.

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