Benefits of Refinancing to Remove PMI:
You have looked forward to eliminating this expense since your first mortgage payment. Instead of waiting for your mortgage servicer to remove it, consider a mortgage refinance which may offer the following benefits:
- Elimination of PMI
- Lower monthly mortgage payments
- Lower interest rates
When Should I Consider a Refinance to Remove PMI?
If your monthly mortgage payment includes PMI, consider refinancing to eliminate the expense when you have 20 percent equity in your home. You may benefit from refinancing a FHA loan to one that offers a lower rate and better terms. Refinancing your loan can help you to eliminate the PMI requirement more quickly.
Calculating Your Loan-To-Value Ratio(LTV):
Loan-to-value (LTV) is a common way to determine the equity you have in your home. To calculate this percentage, take your current loan balance divided by the current value of your home. Subtract the LTV percentage from 100 percent to get the percentage of equity you have in your home.
For example: Your loan amount is $320,000 and your home is valued at $400,000. Therefore, your LTV is 80 percent and your equity is 20 percent.