Lower your monthly mortgage payment

With the recent run-up in home prices in the Boise area, some homeowners may qualify to remove the PMI premium from their monthly mortgage payment.

PMI - private mortgage insurance - is insurance that reimburses the lender if the borrower is unable to repay the loan and the lender isn’t able to recover all its costs after foreclosing the loan and selling the property. If you financed in a first mortgage more than 80% of the purchase price of the home you purchased, you are probably paying PMI. The annual cost of PMI varies with the type of loan but can run between .19% and .9% of the total loan value and is paid monthly as part of your loan payment. Removing this part of the payment could be a fairly substantial reduction in the amount you pay each month.

For example, say you purchased a home for $200,000. in 2004 and financed $180,000. Because you financed over 80% of the purchase price, part of your monthly payment includes PMI - somewhere between $28.50 per month and $135. per month. During the past couple of years your home has appreciated 20% to $240,000 - not uncommon with the price increases of 2005 and 2006 in the Boise area. Now you have 25% equity in your home and should qualify to remove the insurance.

To see if you qualify to remove PMI from your monthly mortgage payment, contact your lender or the company servicing your loan. Typically, some paperwork must be completed and a new appraisal is required to prove the value of your home. A few additional rules apply so it’s best to contact your lender. For more information about removing PMI, check out the Federal Reserve Bank of San Francisco website.