Private Mortgage Insurance

What Is PMI?

PMI is a type of insurance that lenders require for mortgages with high loan-to-value (LTV) ratios. This insurance premium is paid by the borrower and can lower the risk associated with these higher LTV loans to lenders. PMI pays part of the remaining balance if you were to default on your mortgage.

When Is PMI Required?

You may have to pay for PMI if you’re purchasing a home or refinancing your mortgage. Lenders may require PMI on loans when:

• Your down payment is less than 20% of the sales price on purchase loans.
• Your LTV is over 80% for refinance loans.

Who Provides PMI?

A lender will arrange PMI on your behalf with a provider of their choice.

When Do You Pay PMI With Community Savings Bank (CSB)?

CSB will set up the PMI payment and coverage. The insurance premium is added to your monthly payment amount and disbursed from your escrow account.

What Affects PMI Costs?

PMI costs will vary based on the following factors

• Type of loan
• Loan-to-value ratio
• Your credit score

Can You Reduce or Eliminate PMI:

You can submit a written request to your lender to cancel your PMI when your mortgage balance reaches 80% of your home’s original value. Requirements may include the following:

• You’ve made all your scheduled payments.
• You’ve made additional payments to reduce the principal balance ahead of schedule.
• Your property value must be at least the same as its original value.
• There are no second liens on your property.
• You must have a good payment history performance. Meaning, you cannot have any 60 days or more past due during the 12-month period beginning 24 months before the date your mortgage reaches the cancellation date or 30 days or more past due during the 12-month period before the date your mortgage reaches the cancellation date.

Your lender must automatically cancel your PMI when:

• You reach 22% equity in your home based on the original appraised value and the original amortization schedule.
• Your mortgage payments are current.

You can submit a written request to your lender to cancel your PMI based on an increase in your property’s value. Additional requirements include:

• You need a good payment history
• If your mortgage is at least 2 years old but less than 5, you will typically need 25% equity in your home.
• If your mortgage is 5 years or older, you typically need 20% equity in your home.
• Your lender will typically request an appraisal be performed to verify the value of your property.
• Additional requirements may be required by your lender.

How To Avoid Paying PMI?

• Make a down payment of 20% or more of the sales price when purchasing a new home.
• If your loan currently has PMI, pay down the mortgage balance to 80% LTV before pursuing a refinance.