So the other night I was up bright and early and thinking about PMI. So I started to do a little research. Based on a Pre Sales Cost Estimate that we did earlier this year, the PMI on the sales price of $323,000 was going to be around $180 a month. I really hate to have anything on my payment that is unnecessary so I started to research on how we could remove the PMI without putting 20% down.
Just a quick note, if you are not putting 20% down on your house, be sure to have an in-depth conversation with your lender about PMI so that you clearly understand what your options are. Every lender is different. With NVR, I am know they give you an option to Pre-Pay your PMI but I have not received all of the details around it.
We are hoping we can save and just Pre-Pay the PMI at closing.
Here is what I learned in general about PMI.
- PMI - It is put in place to protect the lender in case you default on the loan
- PMI - It is not removed unless you reach 20% Mortgage to Loan Value or if you Refinance.
- You can Pre-Pay PMI to remove it from your mortgage upfront - It is typically about 1.75% of the Purchase Price to Pre-Pay and Remove the PMI. So on a $300,000 sale price it would cost around $5,250 to Pre-Pay and remove the PMI. This is a no-brainer! Over the life of the loan, you are going to save around $17,000 if you Pre-Pay your PMI upfront! Other terms used that mean the same as Pre-Pay PMI are Single Pay PMI and Single Premium Insurance.