The excitement of buying a new home is very real. There are so many factors to consider; credit score, down payment, price, location and style of home, that when we get the green light, we sign the dotted line and move in.
If you did not have a 20% down payment, a private mortgage insurance (PMI) was tacked on to your monthly payments and it’s only there to protect the lender.
If you purchased a home for $200,000 with 5% down, your PMI would be $150.00 added into your monthly payment.
Once your equity reaches 78% you can notify your lender and have it removed unless it is an FHA loan. FHA required PMI to stay on the life of the loan.
Fortunately, you do have an option- refinance. If the value of your property has increased, especially if you purchased between 2009 and 2013, your showing the biggest gains in today’s market. You can use those gains to get to your 20% equity. If your credit score is good, you can most likely get a better interest rate that will lower your overall payment plus drop the PMI and switch to a conventional loan if you have an FHA. A win win for you and your pocket book!