Summary
Private mortgage insurance is required on most mortgages, but the myth about having to wait 5-10 years before you can stop paying is not true!
In this blog, I want to debunk a common myth that we often hear from homeowners: you have to wait 5 or 10 years before you can stop paying private mortgage insurance (PMI). Not true! I confess: my lender kept me in the dark about this as well.
As we all know, home prices have been going up like crazy the past couple of years. This trend actually helps you get rid of your PMI sooner!
PMI is required on most mortgages if the borrower’s down payment is less than 20%. With the average down payment being 12%, this is very common — I put down 10% when I bought my first home. In these cases, your lender tacks on a monthly PMI fee to protect them from the extra risk of a smaller down payment.
PMI is expensive: it typically costs between 0.4 – 2.25% of your loan amount each year. So, a $400,000 mortgage would include $1,600 – $9,000/yr in PMI…as much as $750 per month!
By law, with most mortgage types you can stop paying PMI when certain conditions are met.
