How to Get Out of PMI

It seems like a waste to spend money on private mortgage insurance (PMI) when you could use the amount to pay down your mortgage or ease up another area of your budget. The private mortgage insurance on my first home loan accounted for $60 of my monthly payment, money I felt was better spent elsewhere. I managed to ditch it and was glad I did. If you want to get out of PMI, get started today. Here's how to get out of PMI and save some money.

Difficulty: Moderately Easy

Instructions

1. 

   Figure out the approximate net worth of your home and the amount you still owe (see most recent mortgage statement). Divide the amount you owe by the value of your home. If the amount is 0.80 or more, you have at least 20% equity in your home, which is what you want. (For example, if you owe $80,000 on a home worth $100,000, you get .80, meaning you have 20% equity).

2. 

   Contact your mortgage company and find out the requirements to have your PMI removed. By law, the company must automatically drop your PMI if you have 22% equity, no other liens on the home and a good credit history. When I called Countrywide to have my PMI removed, I had to wait an extra few months until the two-year anniversary of my loan; which is typical. for many lenders.

3. 

   Follow up with your lender, submitting required paperwork and scheduling a professional appraisal, if required. Start the paperwork a month before your two-year anniversary to ensure it is removed right away when all requirements are completed.

4. 

   Use the extra cash each month to improve your house, pay down your mortgage more quickly, or otherwise improve your finances.

Tips & Warnings

• If your house has gone up in value a good deal since you bought it, you'll be able to get the PMI removed more easily as it will appraise well.
• Don't take out a second lien or home equity line of credit before you get PMI removed, as a second loan disqualify you.

[Neecy]

on 8/7/2008 Very nice article...One thing I would add. When we tried to do this make sure that the appraiser you hire is FHA approved. We did not find out until after we paid an appraiser to appraise our house that he was not FHA approved. We were out the money for the appraisal, still had our PMI, no more money to spend on a new appraisal, and no energy to fight it.

[WriterGig]

on 8/6/2008 Is there any way for you to come up with another 10 percent? Sell a boat, vehicle, etc.? Buy a cheaper house? $300 on PMI per month is awful!!

[ThomasRudenko]

on 8/6/2008 I am told by two brokers that second loans are becoming a thing of the past...what to do with 10% down on a 700K house without wasting 300/mon on PMI...full doc. loan with 800credit and still have to jump through hoops...HELP

[WriterGig]

on 6/9/2008 MidniteWriter--the funny thing is, we wrote them on the same day! Weird, huh?

[MidniteWriter]

on 6/9/2008 This fits in nicely with my PMI article. I just think no one should have to pay this!! It doesn't help the homeowner, only the bank which has too much already!
Great article!