If I Refinance, Do I Have to Pay PMI?

Q: Layoffs hit our community hard, and the dream home we bought a decade ago was just reappraised by the county for $20,000 less than when we went to closing. We used refinancing to pay for renovations over the years, but now I just want to refinance so we can get a better monthly payment. Since we still owe 95% of our current home's value, will I have to budget for PMI premiums?

A: Whether you're participating in a government-backed mortgage loan modification program or you're simply refinancing with your lender based on a new appraisal, private mortgage insurance could be a part of your monthly payment again. Think back to when you first bought your home, with a small down payment. As long as you held less than 20% equity, your lender required you to maintain PMI. When your home's value shot up, your PMI went away.

Ten years later, and it might just feel like you've wound back the clock. You'll have to pay a monthly premium, but it sounds like you're one of the lucky ones. Remember, today's refinance rates are low enough that you may be able to get a monthly mortgage payment that includes your PMI costs and still shaves dollars from your annual housing budget.