Log in
    978-468-2138
    617-942-4005

Realty Services in Wenham, MA  | Greater Boston Area & Massachusetts | Buyer's Choice RealtyRealty Services in Wenham, MA | Greater Boston Area & Massachusetts | Buyer's Choice Realty

Realtors® Helping Buyers Locate,
Evaluate, and Negotiate
their Dream-Home Purchase since 1990
  • Menu
  • Search For Boston Real Estate
    • Search by the Listing Number
    • Search by the Address
    • Map Search
    • Advanced Search
  • Exclusive Buyer Agency
    • How Are We Different?
    • Free Home Buyer Consultation
    • FREE Home Buying Process E-book
    • Massachusetts Agency Disclosure
  • Home Search By Areas
    • Boston Metro West
    • Boston North Shore
    • Boston North West
    • Boston South Shore
    • Metro Boston
  • About Us
    • Our Agents
    • Our Testimonials
    • Contact
  • Articles

Boston Area Mortgage Insurance – Getting Rid of it

If you have a Boston area mortgage and didn’t make at least a 20% down payment, you probably have private mortgage insurance (PMI.) PMI protects the lender if the borrower is unable to make the mortgage payments. Because PMI premiums are paid monthly in the mortgage payments, they can add up. So, how can you avoid PMI or drop it later?

If you have a Boston area mortgage and didn't make at least a 20% down payment, chances are you have private mortgage insurance (PMI)

Avoid Boston Area Mortgage Insurance

The first way is easier said than done. To avoid PMI make sure you borrow 80% or less of the home’s value. In other words, put 20% down when you purchase. Some people – even if they have the money – are hesitant to wipe out their savings or spend the money they were planning to use to make improvements to their new purchase.

Sometimes, your mortgage lender will pay the PMI for you. Lender-paid PMI involves the Boston area mortgage lender paying for the insurance in exchange for a slightly higher interest rate. The lender pays the PMI company directly, while the borrower “repays” the premium in higher monthly principal and interest payments. Many homeowners like that because they can deduct all the interest paid, while the PMI premiums are not deductible. One word of caution, however: while you can request the mortgage insurance requirement be dropped in time, the higher interest rate will remain until you sell the home, pay off the mortgage or refinance.

Lenders are required by the Homeowners Protection Act to remove PMI once the mortgage loan balance has dropped to 80% or less of the home’s original sales price. That could take a while, but there’s a way to remove it more quickly. By watching the marketplace you can get an idea of your home’s value. As your home appreciates, the remaining loan amount you owe is a lower percentage of your home’s new value. This ratio – called the loan-to-value ratio, or LTV – will over time be at or less than 80%. When that happens, request that your lender drop the PMI requirement.

For documentation, your lender may require an updated appraisal of your home and will require you to pay for it. But remember, only approach your lender when you’re confident your home’s value qualifies for the 80% or lower LTV. Consult a real estate agent or use the Internet to monitor comparable homes in your neighborhood. An appraisal will probably cost $300-$500, so make sure you qualify to remove the PMI before you contact your Boston area mortgage lender. Lastly, some lenders require the borrower to keep the PMI coverage for a minimum of two years. Check with your lender to find out what they require.

Sometimes, simply asking your lender to do away with PMI won’t work. An FHA loan, for example, requires PMI for the entire loan term. In that case, you’ll need to refinance – either with a non-PMI required FHA loan or a conventional loan. However, be smart. Refinancing just to get rid of the PMI insurance premium probably isn’t a good idea since closing costs aren’t cheap. It may cost more out of pocket than it’s worth. Consider refinancing only if it makes good financial sense.

Get more mortgage tips and information in our Boston area Mortgage Info section of articles to your right just below Boston area Real Estate Categories. And check us out on Facebook and Twitter as well.

Posted in: Boston Mortgage Info

Post navigation

« Boston Area Home Buying Tips: Choose a Pro
Do You Need a Boston Area Home Warranty? »

Property Quick Search

Advanced Search Map Search

Contact Us

Use this form to contact us via email. Thank you!

    Popular Searches

    • Acton MA Real Estate
    • Amesbury MA Real Estate
    • Ashland MA Real Estate
    • Bedford MA Real Estate
    • Boxford MA Real Estate
    • Burlington MA Real Estate
    • Centerville MA Real Estate
    • Charlestown MA Real Estate
    • Chelmsford MA Real Estate
    • Danvers MA Real Estate
    • Dedham MA Real Estate
    • Dracut MA Real Estate
    • Georgetown MA Real Estate
    • Stoneham MA Real Estate

    Boston EBA

    • We show you more. We save you money.
    • We protect your financial interest.
    • We help you locate, evaluate, and
    • negotiate a successful home purchase.
    Boston Exclusive Buyer Agency - Member of NAEBA
    Massachusetts Buyer Agent - Boston Real Estate Specialist

    Buyer’s Choice Realty

    • Corporate Office
    • 162 Main Street
    • Wenham, MA 01984
    • Phone: (978) 468-2138
    • Phone: (617) 942-4005
    Design and Hosting by Hudson Enterprises, Inc. · © 2023 Buyer’s Choice Realty Privacy Policy · Sitemap