Private mortgage insurance or PMI. If you bought your house in the past 4 years but didn't put 20 percent down, you're probably paying it. PMI has been required for some loans since the housing crisis...to protect the bank.
"Contrary to what a lot of people think, it's not there for the consumer," said Stephanie Hendrick from VIP Mortgage. "So if you were to default on the loan, it's not there to make the payment for you."
The cost of PMI varies from person to person, depending on factors like credit score and down payment. But it's definitely hundreds, if not thousands a year, paid to your lender along with your mortgage and you get no benefit.
"It will automatically drop off eventually when you (owe) 78-percent of the original loan balance," said Hendrick. "The only way to get it off sooner is to call them if you have an equity position."
And you may right now. According to Zillow, Arizona home values are up 6.5-percent over the past year, a whopping 9-percent in Phoenix. So some Valley residents that had a house worth $200,000 just last year, may now live in a house worth $218,000. Curious if you can drop your PMI? Call your lender. They may require an appraisal.
Gregory Wronski from Wronski Appraisal Services said he looks at factors like how much houses comparable to yours have sold for and are listed for.
"We're also noting upgrades tile, carpet, wood, and window treatments like wood blinds or plantation shutters," Wronski said.
Wronski said to make sure your house is clean before the inspection, though he's trained to look past that, the photos he takes are going to the lender. Also, make a list of improvements. Did you add new fixtures, upgrade the kitchen, add a pool? All of these changes can increase the value of your home.
Wronski said yes, bathroom and kitchen remodels add the most value, and no, improvements you intend to do can't be considered in the value.
Hendrick said different banks have different rules on how long you must keep PMI. Some may require you wait a certain period of time. Also, FHA loans must carry PMI. Your only choice to is to refinance to drop it. Regardless of your situation, calling your lender to talk about your options could save you thousands of dollars.
To read more about your rights regarding the cancellation of your mortgage insurance, click here for more on the Homeowners Protection Act.