Cut Down on Costs : Remove PMI
Mortgage Hack #6
Private Mortgage Insurance (PMI) is insurance that protects the lender in case an owner should default on their home. When a buyer takes out a traditional mortgage and puts down less than 20%, PMI is necessary. With the consent of the lender, PMI can be discontinued whenever the homeowner has more than 20% equity. Lenders will perform a house value upon request to assess whether or not PMI can be dropped.
For a conventional home loan, the annual cost of PMI ranges from 0.58% to 1.86% of the original loan amount.
Once the borrower has enough equity to help eliminate the PMI on their FHA loan, they can refinance into a conventional loan.
Reference: 2022 Keller Mortgage LLC