You can accelerate the cancellation of PMI with a good plan of attack. Home improvements can increase value and additional loan payments to increase principal can decrease the LTV ratio and help get rid of PMI sooner.
ADD TO PRINCIPAL
Additional periodic or lump sum payments can be made to lower the outstanding loan balance. A lower loan balance has a direct effect on the LTV ratio. PMI is determined at loan initiation and remains constant until it gets cancelled at 78% LTV. If you’re close to that limit, e.g. 85% or 82% LTV, etc., put in the funds to reach the goal of 80% LTV for refinancing the loan or 78% for cancellation with current lender. As you get closer to the waiver LTV ratio, the relative cost of PMI grows, e.g. $75 a month PMI on $10,000 needed to reach 78% LTV equates to a 9% annual cost, e.g. $900 divided by $10,000. If there is $5,000 left, the $75 a month is now 18% cost. You also avoid paying interest on the principal you’ve paid off, e.g. 4% mortgage interest, so that $5,000 is now worth a 22% cost savings. Dollars saved are dollars earned.
BUILD HOME VALUE
You can add value with “substantial improvements” that increases the home’s value. Examples of substantial improvements include adding a deck, garage, living space, etc. Cosmetic improvements are not considered substantial improvements. Examples of cosmetic improvements include new flooring, siding, windows, paint, light fixtures, landscaping, appliances, heating /air conditioning unit, etc. However, do keep in mind that both cosmetic and substantial improvements have a positive impact on home appraisals when considering refinancing to a new loan / lender.
- Do-It-Yourself Improvements
You can make simple cosmetic improvements without the need for professionals. Painting, landscaping, minor repairs, new decks, trim, etc. These can have a tangible impact on home value when getting new appraisals.
- Hire a Pro
WHAT IT’S WORTH
Remember that not all improvements will have the same impact on improving the value of your home. In fact, some additions could have little impact on your home value. According to Remodeling magazine’s annual Cost vs. Value Report for 2014, improvement costs to value ratio varies from a high of 96.6% (96 cents of value for each dollar spent) for a new front door to a low of 46.6% for a home office remodel.
FREE FOR A LIMITED TIME
The confidential PMI Zombie Quick Check helps you know when you can request cancellation of PMI. Combined with information you provide, you get:
- Current estimated loan to value ratio (LTV)
- Estimated appreciation for homes in your ZIP code
- Recommended next steps to help cancel PMI
Private mortgage insurance (PMI) is a “zombie” that can live on even after PMI can be cancelled. Get a personalized PMI Zombie Quick Check for your house and mortgage loan. We can help tell when PMI should be cancelled! ORDER NOW!