If you’ve purchased your home with a down payment lower than 20% of the purchase price, you’re likely paying each month for private mortgage insurance (PMI).

We’ve got all the details on PMI, why you need it, how it’s paid, when you can cancel, and more.

What Exactly is Private Mortgage Insurance?

Private Mortgage Insurance, also called PMI, is a type of insurance you may be required to pay for if you have a conventional loan. PMI protects the lender if you stop making payments on the mortgage loan.

PMI is not to be confused with Homeowner’s Insurance, which is required and protects the physical home and property.

When is Private Mortgage Insurance Required?

PMI is required when a borrower has a conventional loan and makes a down payment of less than 20 percent on the price of the home, they are buying. However, if a borrower puts down more than 20 percent, PMI is not required.

Take into consideration the same thing for a home refinance. If you refinance with a conventional loan and your equity is less than 20 percent of the value of the home, PMI is usually required. Speak with your lender for more information.

How Do You Pay for Private Mortgage Insurance?

In most cases, mortgage lenders will roll PMI into your monthly mortgage payment as a monthly premium. Other times, PMI can be paid for as a one-time up-front premium which is paid at closing. Your loan estimate and closing disclosure documents will specify the amount of your Private Mortgage Insurance.

When Can You Cancel PMI?

The good news is that you will not have to pay private mortgage insurance forever. It can be canceled once your loan-to-value (LTV) falls below 80 percent of the home’s original appraised value. Sometimes this can happen sooner if your home’s value appreciates before then.

How Do I Cancel My PMI?

As we noted above, you may be eligible to cancel your PRMI when your equity reaches 20 percent. Your Private Mortgage Insurance will fall off automatically once you reach 22 percent equity. However, if you’re at 80 percent equity, want to be proactive, and save some money, you can reach out to your mortgage lender and request that they cancel your PMI. Your lender will advise on the necessary steps to take to cancel PMI.

If you’re not quite at 80 percent equity in your home, continue to make your mortgage payments on time each month.

Mortgage Tip: Have extra cash for a month? If so, put that money toward your principal to build your equity even faster. Be sure to make a note to your lender that you want the extra payment to go towards your principal balance and not your next mortgage payment. This can easily get confused or overlooked otherwise.

Is The Time Up on Your PMI? It’s Time to Find Out!

Use our PMI Removal Calculator to find out if you’re eligible to drop PMI and, if not, how much further you may need to go before you get to that point.

If you have any questions along the way about canceling PMI or home financing in general, please reach out. We are happy to help.

If you've been following the news lately, you've heard about rising inflation. Today, inflation is at a 40-year high.  According to the National Association of Home Builders (NAHB):

“Consumer prices accelerated again in May as shelter, energy and food prices continued to surge at the fastest pace in decades. This marked the third straight month for inflation above an 8% rate and was the largest year-over-year gain since December 1981.”

As prices go up for gas, groceries and more, your wallet is likely feeling the impact. If you're thinking about purchasing a home this year you may have hesitated a time or two. Is now the right now? That depends on your current situation. Homeownership is a great hedge against the impact of rising inflation. Here's how homeownership can help you combat rising costs. 

Are you protected?

With all the talk of rising prices, there's one tool that has proven time and again to serve as a hedge—or protection—against inflation:

Owning a Home.

Real estate prices have been rising along with everything else. There are the usual factors of supply and demand, but inflation itself is impacting values too. Given rising labor and material expenses, it now costs more to build a home or replace one that's been damaged. That contributes to making existing properties more valuable too.

Here are some ways homeownership serves as a hedge against inflation.

1. As your home appreciates in value, you gain more in equity, yet your costs remain relatively stable.

2. For most homeowners, the increases in home values far outpace the increased costs of other goods. For example, you may be spending $4,000 for gas this year instead of the $2,000 it cost last year. Yet if you own a home that was worth $300,000 last year, it may be worth $360,000 this year as values are up more than 20% nationally.

3. Increases in value are not money in your wallet, though you may be able to access cash through a home equity loan or line of credit. Otherwise, you can realize the benefits when you sell or refinance your home.

4. Many owners reduce their housing costs through tax deductions. (Always consult with a tax advisor.)

5. Homeowners often avoid capital gain taxes, and even for real estate investors, taxes on gains are deferred until sale.

If you're not yet hedging your purchasing power with a home of your own, there may still be time to act before costs increase further.

Please reach out if we can assist you or someone you know.

Changes are coming to medical debt reporting on consumer credit histories. In fact, credit scoring is changing to help consumers – specifically those with medical debt. That's not something you hear every day! Could a change in medical debt reporting help you? Read on for what borrowers should know about changes to how medical collections debt is reported.

Medical Debt is a Huge Element of Consumer Debt

When you think of consumer debt, overspending on credit cards may come to mind first. However, according to Consumer Financial Protection Bureau research, there’s $88 billion in medical debt on consumer credit records as of last June. COVID-19 sure hasn’t helped. Those with excellent credit records are sometimes dragged down by medical debt, too.

Having a debt in collections can eat away at your credit score by 100 points. Keep in mind, that these new changes will not erase medical debt. You're still responsible for paying it off. 

What You Need To Know

The three primary credit repositories (Equifax, Experian and TransUnion) have agreed to changes that will wipe approximately 70% of medical collection debt from consumers' credit files. Here's what you need to know.

As of July 1, 2022:

1. Medical collection debt will be removed from credit reports after it has been paid. Typically, debt sent to a collection agency remains on a report up to seven years.

2. Negative reporting for unpaid accounts will appear on reports only after 12 months have passed. This gives consumers extra time to finalize questions with providers and insurers before the debt affects their credit rating.

3. Medical collection accounts below $500 will not be included on reports at all.

Bottom Line

If you or someone you care about has been denied credit or paid more due to a low credit score impacted by medical collection debt, it may be time to try again.

Please reach out with questions or to see if these changes may improve your credit scores. And if you know of anyone else who could benefit, please pass the information along or let us know. The Greenway Team is happy to help.