How to get rid of Private Mortgage Insurance PMI

Member

By Wasatch
User-Submitted Article

Article Rating: (6 Ratings)

Home Value

PMI or Private Mortgage Insurance is usually required by mortgage lenders unless you put down 20% as a down payment when you bought your home. If not you are probably spending $60 to $100 on an average moderate home each month for PMI as part of your house payment. If you meet certain guidelines you can petition to have the PMI dropped and lower your monthly payment.

Difficulty: Moderate

Instructions

Step 1

First determine if you qualify for removal of the mortgage insurance. You must have had the loan at least 2 years and not have made any late payments. You must have made your purchase after July 29th, 1999 or refinanced since then into a new loan to qualify under the Home Buyers Protection Act.
Step 2

If the loan is seasoned for at least the 2 years you can drop the insurance if the loan has been paid down from the original purchase price by 22%. You can request the lender drop the insurance at 20% LTV (loan to value) but they are not required to until you reach 22%. I believe it is 25% for Fannie Mae. If you have paid down your loan call your lender and request the insurance be dropped.
Step 3

If you have not reached the 22% paid off from the original purchase amount you may still be able to drop your insurance if home values have risen to give you more than 22% equity. This is easy with fast rising values. It is harder in a declining housing market. If you think you qualify on the basis of your appreciation since purchase contact your lender and ask for an approved appraiser recommendation. You will need to pay for the appraisal of your home and if it meets the LTV amount they should drop your PMI and save you money every month. An appraisal will be around $400 to $500 so make sure you think the value is there before you hire the appraiser. If you are successful you should recoup your investment in about 6 month of payments.