Has Your Home Value Appreciated? It May Be Time to Drop Mortgage Insurance
January 18th, 2022
January 18th, 2022
Are you paying for mortgage insurance in the form of MIP or PMI? It is to your financial advantage to get rid of mortgage insurance as soon as you can.
If your home value has increased recently, it may be worth checking whether that means you can now shed your mortgage insurance. In today’s post, we will explain exactly how this works.
The exact rules governing your mortgage insurance will depend in part upon the type of mortgage you have and some specific factors pertaining to your loan. But many borrowers can remove mortgage insurance after surpassing a certain amount of equity.
If you live in Indianapolis or elsewhere in the state of Indiana, you may have seen a significant boost in home equity over the past year.
18 WJTS reports, “Between October 2020 and October 2021, the year-over-year percent change in Indiana home prices was +17.4%.”
That is quite a jump. Below, we discuss how such an increase in home value could help you to stop paying for mortgage insurance.
A Simple Example: How Appreciation Can Help You Remove Mortgage Insurance
For this example, we will assume that you took out a conventional mortgage and that you made a 10% down payment. That means that you pay for PMI.
Imagine that your home was worth $150,000 when you bought it. Since you put 10% down, that meant that your starting equity was $15,000. Now say your home’s value has appreciated to $200,000. That means that your appreciation gains are $50,000.
If you add $50,000 to your original $15,000, you get $65,000. That amounts to more than 30% of $200,000, which means that your equity now exceeds 20%.
That is not even accounting for the fact that you have been steadily reducing your principal by making mortgage payments since you bought your home.
Now you have seen an example of how home appreciation can help get rid of mortgage insurance. But probably have questions about how home appreciation affects your equity, and what you need to do to get rid of MIP or PMI.
To find out if the climb in home values in Indiana over the past year may be your ticket to getting rid of your mortgage insurance, please contact Grandview Lending today at (317) 255-0062. During your consultation, we can review the details of your individual scenario and let you know what steps to take next.
We provide our clients with exceptional service and integrity which has become our hallmark.