PMI on a house hack- at what point does the PMI bill end?

Question

Is the PMI a deduction on the tax return?  How is it treated in the accounting?

Is there a point when the PMI goes away?  If so when does that happen?

Chris Davidson · Answer

@Lauren N. If it is FHA PMI does not end. If it is conventional as soon as the balance is 78% of the purchase price they will drop it, or if you reach out have it re appraised and you have 20% equity they will drop it.

Best of luck!

Galen Ikonomov · Answer

That is not true Chris. There are situations where FHA PMI drops. As far as the PMI if it is Tax deductible, IT IS. I just looked at my Tax preparation form that my CPA provided and PMI was on there.

Loan amount

LTV

Mortgage insurance premium in basis points

Duration of insurance payments

$625,500 or less

90% or less

80 (0.8%)

11 years

90% to 95%

80 (0.8%)

Entire loan term

More than 95%

85 (0.85%)

Entire loan term

More than $625,500

90% or less

100 (1%)

11 years

90% to 95%

100 (1%)

Entire loan term

More than 95%

105 (1.05%)

Entire loan term

Galen Ikonomov · Answer

@Chris Davidson I posted a table of the breakdown with my previous comment. But I will summarize it here: That is for loans that are 15 year term or higher.

If the loan amount is $625,000 or less - When you put at least 10% down payment or more your PMI is 0.80% for 11 years and then drops. Everything under 10% is for the life of the loan, the difference is the PMI % every month. For example, If you put at least 5% but no more than 10%, your PMI is 0.80%. Everything under 5% Down payment is 0.85% for the life of the loan.

Majority of the buyers when using FHA loan do not put more than 5% down payment and therefore the PMI sticks for the life of the loan. My point is, there are options that you don't have to have it for the life of the loan.

Hopefully that helps!

Galen Ikonomov · Answer

@Chris Davidson Reasons usually are bad credit score, DTI is too high, and the person/family has to put more money down in order to lower DTI. Then you have got bankruptcy which is 7 year wait using Conventional loan or around 2 years with FHA and then you have the same scenario, High DTI, bad credit.

Chris Davidson · Answer

That is good news Galen what has to happen for mortgage insurance to be dropped off of a FHA loan?

Chris Davidson · Answer

@Galen Ikonomov appreciate it. Makes sense, but yeah don't know many who would use an FHA and put more than 10% down over just going conventional but sure there could be a reason. Appreciate taking the time to break it down.

Eric Yu · Answer

Not an accountant, but yes, PMI is deductible on your tax return.

If you don't proactively reach out to a lender, the date that your principal hits 22%, it'll automatically terminate PMI; remaining loan amount is 78% of the original purchase price. Otherwise, if due to appreciation, or upgrades in your home where you built equity, you can request a new appraisal to remove PMI if you have built up 20% equity.

Nicholas Coulter · Answer

@Lauren N. not an accountant but I think so! At least I have done it

Lauren N. · Answer

thank you!

PMI on a house hack- at what point does the PMI bill end?

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