You Can Still Deduct PMI But How Do You Get Rid Of It

You Can Still Deduct PMI But How Do You Get Rid Of It


With few exceptions, most homeowners purchasing a house with less than 20 percent down have to buy private mortgage insurance — PMI. This insurance, which makes home ownership possible for so many purchasers, covers the lender in case you default, and it generally adds between $50 to just over $100 to your monthly payments. You may be stuck with it for now, but can you get rid of it? 

Eventually, you can. You reach a point where the bank basically sees that you have enough equity in the house so the insurance isn’t necessary anymore. Federal law actually requires banks to cancel PMI when you hit certain thresholds. As the law puts it, this happens when “the principal balance of the mortgage is first scheduled to reach 78 percent of the original value of the secured property.” This is referred to as the loan-to-value ratio — the outstanding loan divided by the value of the property.

Even if you haven’t reached the magic “78", you can request cancellation at other times. The servicer is supposed to cancel the insurance at the halfway point — so, 15 years into a conventional 30-year mortgage.

Also, you have the right to ask for earlier cancellations — at 80 percent. The Consumer Financial Protection Bureau gives instructions for doing this:

  • Your request must be in writing.

  • You must have a good payment history and be current on your payments.

  • Your lender may require you to certify that there are no junior liens (such as a second mortgage) on your home.

  • Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the value of the home when you first bought it. If the value of your home has decreased, you may not be able to cancel your PMI.

Of course, to claim cancellation under any of the rules, you should have a clean payment record.

You still can catch a break

While you’re waiting to meet these thresholds, however, you might be able to deduct your PMI costs. This is one of the tax breaks Congress keeps threatening to cancel and then renews at the last minute. PMI in 2017 was deductible, with income limits, but it may not be for 2018. Check with a qualified tax professional about the current status.




Marie Lowe Headshot
Author:
Phone: 214-364-3208
Dated: June 21st 2018
Views: 204
About Marie: With her background of 20+ years in client services and sales management, she understands the needs,...

Property Search








RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

You Can Still Deduct PMI But How Do You Get Rid Of It - With few exceptions, most
Coming Soon In Richardson - -- 100% Financing and Grant for
Coming Soon In Sachse - WOW... shows like a

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

New Age Real Estate
7340 Hwy 78 #1400
Sachse, TX
469-518-4238
214-279-3770