Have you reached 20% equity?
Private Mortgage Insurance (PMI) is required when you put less than 20% down. However, many California homeowners have gained significant equity due to market appreciation over the last few years. If your Loan-to-Value (LTV) ratio is now 80% or lower based on current market value, you can eliminate this fee.
Immediate Savings
PMI typically costs 0.5% to 1% of your loan amount annually. On a $500,000 loan, removing PMI could save you $200 - $400 per month instantly, even without lowering your interest rate.
The Savings Math
Current Situation
- Loan Balance: $480,000
- Original Value: $500,000
- Current P&I: $3,200
- PMI Fee: $250
- Total Payment: $3,450
After Refinance
- New Appraised Value: $650,000
- New LTV: 73% (No PMI)
- New P&I: $3,200
- PMI Fee: $0
- Annual Savings: $3,000
Common Questions
Do I need an appraisal?
Usually, yes. To prove to the lender that your home's value has increased enough to drop PMI, a new appraisal is typically required. However, sometimes we can get an appraisal waiver (PIW) if the automated market data in your area is strong enough.
Should I just "Recast" instead?
A "Recast" is cheaper (often just $150 fee to your servicer), but they often require you to pay down the principal to 78% of the original value, ignoring market appreciation. A Refinance allows you to use the new, higher market value to reach that 20% equity threshold immediately.
What if rates are higher now?
This is the critical calculation. If your current rate is 3% and market rates are 6%, it usually does NOT make sense to refinance just to remove PMI. The higher interest cost will outweigh the PMI savings. In this case, we would advise you to keep your current loan.
Check Your Value
Unsure if you have 20% equity? Contact us for a free automated valuation model (AVM) estimate.
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