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Reducing PMI mid-mortgage?

I understand that when you have approx 20% of the loan paid off, that PMI will fall off under conventional loans.

If at the time of purchase you put 5% down, will the PMI reduce once you get to 10% equity, to the 10% down factor?

I ask because the factors are quite different .95% vs. .62%. If so, would the .62% be based off the original loan amount, or the remaining loan value.
  • September 01 2009 - King of Prussia
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Answers (3)

Based on Citimortgage's policy in their wholesale division, if the borrower wants to get rid of the MI after the LTV was down to 80, they would have to refinance.  However, if they choose not refinance, the LTV would have to be reduced to at least 75 in order for the MI to be removed.  In this scenario, obviously a new appraisal would be needed.  You would need to call the servicing department of your servicer (who you send your monthly mortgage payment to) to get their policy on MI removal.

I hope this information helps.  Best of luck!

Regards,
Total Mortgage Services
  • September 01 2009
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Eric,

I have never heard that the MI companies decide when to drop coverage.  The MI company is the insurer the bank is the insured.  The bank/lender determines when they will drop insurance coverage not the insurance carrier.

I have never heard of the MI factor changing mid loan.  The only way to change the % of MI covergae is to refinance.  To the best of my knowledge.
  • September 01 2009
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Hi xarfox. This question is difficult to answer because PMI for conventional loans is typically offered through 3rd party PMI companies and they all have their own set of guidelines on how, when and why to remove or reduce PMI coverage on your loan.  From my experience on conventional loans and in this environment, I would say that after you have made your payments ontime for at least 24-48 months, you should call your lender and ask that they remove the PMI.  Remember, they do not have to remove your PMI.  PMI is taken out because of risk, and a long-term, excellent payment history will demonstrate to your lender that the risk is virtually gone.  However, please remember, I don't believe their is any magic rule on how or when your PMI will be reduced or removed.  Additionally, depending on when you obtained your loan, it may be held by a third party investor, in that case, your lender (loan servicer) may need to get investor approval to reduce or remove the PMI since they purchased the loan with it. 

In regards to automatic reduction in PMI payments due to LTV factors, the short answer is no.  You always have the right to call and ask for the reduction, but in regards to anyone but you taking the initive to reduce it...no. 

Good luck. 
  • September 01 2009
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