PMI In Oswego: How It Works And How To Remove It

Paying PMI on your Oswego home and wondering how to drop it? You are not alone. Many Kendall County homeowners pay for private mortgage insurance without a clear plan to remove it. In this guide, you will learn what PMI is, what it costs, when it ends, and the exact steps to cancel it or avoid it in the first place. Let’s dive in.

What PMI is

Private mortgage insurance protects the lender if you default on a conventional loan. You usually pay PMI when your down payment is less than 20 percent and your loan-to-value (LTV) is over 80 percent at closing. You pay it monthly, as a one-time upfront fee, or both.

PMI typically costs about 0.3% to 1.5% of your original loan amount per year. Your rate depends on your LTV, credit score, loan term, and insurer. Your lender quotes your exact rate during the loan process.

How PMI differs from other mortgage insurance

• FHA mortgage insurance (MIP) applies to FHA loans and follows FHA rules, not PMI rules. For many FHA loans endorsed after June 3, 2013, MIP lasts the life of the loan if you put less than 10% down. With 10% or more down, MIP is usually required for 11 years.
• VA loans have no PMI. Instead, the VA charges a funding fee with different rules and exemptions.
• USDA loans also have no PMI. They use a guarantee fee structure.
• Lender-paid mortgage insurance (LPMI) raises your interest rate instead of charging a monthly PMI line. You cannot cancel LPMI without refinancing.

How PMI shows up on your loan

You will see mortgage insurance on your Loan Estimate and Closing Disclosure. If it is monthly PMI, it appears on your monthly mortgage statement. If you paid it upfront, you will see a one-time charge at closing.

Here is a simple example. If your annual PMI rate is 0.5% and your loan amount is $300,000, your annual PMI is $1,500, or about $125 per month. This is a hypothetical example. Your cost will depend on your profile and lender.

When and how PMI ends

The Homeowners Protection Act sets clear rules for conventional loans:

• Borrower-requested cancellation: You can request PMI cancellation when your principal balance reaches 80% of the original value. You must be current on payments and meet your servicer’s conditions.
• Automatic termination: Your servicer must end PMI when your balance reaches 78% of the original value, if you are current on payments.
• Notices: Servicers must notify you about PMI cancellation and automatic termination.

What servicers may require in Oswego

When you request cancellation at 80% LTV, your servicer may ask for a current valuation. Some accept automated valuations, but many require a full appraisal or a broker price opinion. You are usually responsible for the appraisal cost. You must also be current on payments, have no recent late payments, and have no new subordinate liens that increase your LTV.

Step-by-step to remove PMI in Oswego

1. Confirm your loan type and servicer. Check your closing disclosure and monthly statement to confirm whether you have PMI, FHA MIP, or LPMI, and which company services your loan.
2. Estimate your current LTV. Use your original purchase price and your current loan balance. For current value, request a comparative market analysis from a local professional or order an appraisal if your servicer will require it.
3. Contact your servicer in writing. Ask for their PMI cancellation process, what valuation they accept, documentation needed, fees, and timelines. Keep all replies for your records.
4. Meet the payment history rules. Many servicers require no late payments in the past 12 months and no more than one in the past 24 months.
5. Provide valuation evidence. If required, schedule an appraisal and submit it with your written request. Be ready to pay the third-party appraisal fee.
6. Consider refinancing. If your equity has grown from appreciation or paydown, a refinance to a conventional loan at 80% LTV or less can eliminate PMI. Compare refinance costs to your remaining PMI.

Alternatives to cancellation

• Refinance to a conventional loan if your current LTV is 80% or less based on today’s value. Weigh costs and interest rates.
• Continue principal paydown until you reach the 80% request point or the 78% automatic termination point.
• Remove or avoid subordinate liens that might block cancellation.
• Sell the home. PMI ends when the mortgage is paid off at closing.

Buying in Oswego: avoiding PMI

• Put 20% down on a conventional loan to avoid PMI from the start.
• Explore Illinois Housing Development Authority programs if you need down payment help. These can change your upfront cash needs and may affect PMI requirements.
• If you qualify for VA or USDA, you can avoid PMI, though each has its own fee structure and eligibility rules.
• Think carefully before choosing LPMI. You may get a higher rate and you cannot cancel it later without refinancing.

Common mistakes to avoid

• Not checking whether your mortgage has LPMI. If it does, standard PMI cancellation rules do not apply.
• Ignoring automatic termination. If you are current at 78% LTV, your servicer should end PMI without a request.
• Missing payments near the finish line. Late payments can delay cancellation or automatic termination.
• Adding a second mortgage that pushes your combined LTV above 80%, which can block PMI removal.

What this could save you

Small monthly PMI charges add up. If your PMI is about $125 per month on a mid-range loan and you cancel it 24 months earlier by documenting your home’s value, you could save roughly $3,000. This example is hypothetical, but it shows why a timely request can matter.

Next steps for Kendall County homeowners

• Pull your latest mortgage statement and calculate your estimated LTV.
• Email your servicer for their exact PMI removal steps and valuation requirements.
• If an appraisal could push you to 80% LTV, schedule it and prepare your documentation.
• If rates and closing costs make sense, compare a refinance with staying the course.

If you want a local perspective on current Oswego values, reach out to Jennifer Haug for a quick check on market activity and to map out your best path forward. Whether you plan to remove PMI, refinance, or sell, you will get clear options and next steps. Connect with Jennifer Haug to get started.

FAQs

What is PMI and why do lenders require it for Oswego homes?

• PMI protects the lender on conventional loans when your down payment is under 20 percent, and it is typically required until your LTV reaches set thresholds.

How can an Oswego homeowner remove PMI early?

• You can request cancellation at 80 percent of the original value if you meet payment and documentation rules, and your servicer may ask for an appraisal.

Does FHA mortgage insurance go away like PMI?

• FHA MIP follows FHA rules, not PMI rules; many post-2013 FHA loans with less than 10 percent down keep MIP for the life of the loan, while 10 percent or more down is usually 11 years.

Can VA or USDA loans help me avoid PMI in Kendall County?

• Yes, VA and USDA do not use PMI, though each has its own funding or guarantee fee and eligibility requirements.

Will refinancing remove PMI on my Oswego home?

• If your new conventional loan closes at 80 percent LTV or less, PMI should not be required, but compare closing costs and rate changes before you refinance.

Is PMI tax deductible in Illinois?

• Tax rules change over time; check current IRS guidance or ask a tax professional about deductibility for your situation.