Private mortgage insurance–or PMI for short–is one of those things that allows you to do something amazing like buy a house. But, at the same time, you don’t want to keep it around for any longer than you have to.
If you’re currently paying PMI, you might be wondering how you can get rid of it more quickly. Canceling your PMI will allow you to put that money into your actual mortgage payment, rather than sending it to an insurance company each month.
Lenders are required by law to automatically cancel your PMI after you’ve paid off 22% of the property’s original value.
I have some good news though: you might be able to cancel your PMI earlier than scheduled due to rising real estate values.
If you’re paying PMI right now, it’s pretty likely that you’ve bought your home in the past few years. We’ve seen some huge jumps in home values, which have likely increased your equity.
In most cases, you need to have 20% equity in your home to cancel your PMI. If your home’s value has increased and boosted the equity you have in your home to 20% or more, you can get a new appraisal to show the increased property value. Then, you can take that appraisal to your lender to show that you now have 20% equity in your home and get your PMI canceled.
Some lenders will require that you use their appraiser while others are more lax on who you use. You will need to pay an appraisal fee for this service, which can run $300-400. As such, you’ll want to make sure that the cost of the appraisal fee is less than the PMI you would pay.
You will also need to ensure that your lender will accept a new appraisal on your home, because not all of them will. If your lender doesn’t accept new appraisals, don’t fret! Just continue to pay into your mortgage and request PMI cancellation when your mortgage’s principal is 80% of the property’s original value.
PMI is helpful, but you don’t want it to hang around any longer than you need it to! If you have any questions about PMI, mortgages, refinances or anything else real estate, feel free to reach out, and I would be happy to chat.