Happy Home InsiderIn order to remove PMI, you are required to have a minimum of twenty percent equity in your home. Once you have paid down the balance of your mortgage to eighty percent of the home’s initially appraised value, you can request that your lender cancel PMI; once your balance falls to seventy eight percent, lenders are obligated to cancel PMI.
Despite the fact that the aforementioned guidelines govern the application and removal of PMI, there are circumstances in which you may be able to get it removed sooner. For instance, in the event that your home has gone up in value, you can refinance your home. If the home’s value has increased by a sufficient margin, the new lender won’t require you to carry mortgage insurance.
Another option for ridding yourself of PMI, is getting a new appraisal on your home as some lenders will honor a new appraisal when determining whether or not you meet the twenty percent equity required to remove mortgage insurance. However, obtaining a new appraisal can cost anywhere from $450.00 to $600.00 so before forking over the cash for a new appraisal, it would be wise to check with your lender to see whether or not this is a viable option.
You can also increase the value of your home by putting in a pool or making other additions to your home. Once you’ve completed your remodel, ask your lender to recalculate taking the new improvements into account.
In today’s market, with mortgage rates as low as they are, opting to refinance can help you to get rid of PMI. For example, if you put down ten percent when you initially purchased your home, and the home has gone up an additional ten percent in value since you made the purchase, you now meet the twenty percent threshold. Under circumstances of this nature, you can refinance with a new loan without being required to carry PMI.
If you have a history of missed or late mortgage payments, you may fall into a higher risk category; lenders will typically impose a stricter set of parameters on high-risk borrowers. It’s important as the borrower, that you make sure you’re completely current on all loan payments prior to requesting removal of PMI. Lenders may also require a higher percentage of equity to be met if the property is being utilized for rental purposes. In addition to lender-imposed conditions required to remove PMI, the Consumer Financial Bureau requires that requests for PMI cancelation must be made in writing, you may also be required to prove that you don’t have any other liens on your home such as a home equity loan or line of credit. You may also be required to obtain an appraisal on your home to prove that the loan balance isn’t more than eighty percent of the home’s current value.
