How to Boost Rental Profits by Eliminating PMI to Accelerate Loan Payoff

By Thirdstone Properties LLC - Thursday, August 3, 2023
In the real estate investment world, savvy moves lead to significant gains. One of those intelligent moves is removing Private Mortgage Insurance (PMI) from your home loan to increase cash flow and profitability. Our Story: In 2019, Elenis and I used our HELOC to make a 15% down payment on our third rental property, resulting in monthly PMI payments. PMI is required by conventional lenders when the down payment is less than 20%. The good news is it can be removed. Why Put Down Less Than 20%? A smaller down payment lets you distribute funds across multiple investments instead of concentrating everything in one property. The strategic benefit is shifting a portion of risk to the lender. How to Remove PMI (per the Homeowners Protection Act of 1998): Automatic Termination: The lender automatically terminates PMI when your principal balance reaches 78% of the home's original value, typically around year 5 of a 30-year mortgage with on-time payments. Final Termination: You can end PMI at the halfway mark of your loan term, such as after 15 years on a 30-year loan, even if you have not reached 78%. Requesting Cancellation: When your principal balance nears 80% of the original value, submit a written request to your servicer. Requirements include a solid payment history and no secondary liens. We paid a $190 fee for a broker's opinion and the process took about 8 weeks. Building Equity: Pay extra toward the principal or enhance property value through strategic renovations. Maximizing PMI Savings: Our PMI was $50 per month ($600 per year). After removal, we redirected that $50 toward the principal each month. On a 30-year fixed loan at 4.75% with 25 years remaining and a $97,000 balance, this reduced the loan life by nearly 4 years and saved approximately $8,680 in interest. Sample PMI cancellation letter template: https://bit.ly/PMI-Cancelation-Letter-Word-Template Disclaimer: The information in this article is for informational purposes only and does not constitute financial, legal, or investment advice.

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Thirdstone Properties LLC
Thirdstone Properties is a real estate investment and property management firm dedicated to helping investors maximize returns while delivering exceptional service and quality homes to residents.
Thirdstone Properties is a real estate investment and property management firm dedicated to helping investors maximize returns while delivering exceptional service and quality homes to residents.
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