How to Get Rid of PMI

How To Get Rid of PMI Article

Private Mortgage Insurance (PMI) is a type of insurance certain borrowers are required to pay. If a borrower is in the market to buy a house or refinance their home and has less than 20% in equity, they may be required to pay PMI.

Here are four ways to remove PMI.

1. Pay down your mortgage

Your mortgage lender automatically removes PMI once you reach 20% to 22% in home equity. Your monthly statements pay towards your loan’s principal, therefore, every month you own a little more equity.

Whether it be fixed-rate loans or adjustable-rate loans, mortgage lenders must also automatically remove PMI once you reach the halfway point of your amortization schedule. If you have a 15-year loan, the halfway point would be 7.5 years and if you have a 30-year loan, the halfway point is 15 years.

2. Request PMI cancelation

Once you have 20% in home equity and your mortgage balance is 80% of the loan, you can request your mortgage lender to remove PMI.

3. Refinance

Refinancing your mortgage to a lower interest rate or different loan terms can remove your PMI. PMI will be dependent on the new loan amount and equity. Removing PMI with a refinance can only be done on a rate-and-term refinance mortgage.

4. Reappraise your home

When home appreciation is high, paying for a home appraisal may help you get rid of PMI. You can gain equity when your home appreciates in value; getting a home appraisal done may reveal additional equity.

Homeowners wishing to remove PMI need to deliver the request in writing. The homeowner must also have a good payment history, not have any liens on the property, and agree to get a professional appraisal done.

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