Private Mortgage Insurance (PMI) can be a helpful tool for homebuyers who don’t have a 20% down payment—but it doesn’t have to be a lifelong cost. If you’re ready to reduce your monthly mortgage expenses, here’s what you need to know about getting rid of PMI.
What Is PMI?
PMI is a type of insurance that protects your lender in case you default on your loan. It’s typically required when your down payment is less than 20% of the home’s purchase price. While it benefits the lender, the cost is passed on to you—usually in the form of a monthly premium added to your mortgage payment.
When Can You Remove PMI?
There are a few ways to eliminate PMI, and the right approach depends on your loan type and current financial situation.
1. Reach 20% Equity in Your Home
Under the Homeowners Protection Act, you can request to cancel PMI once your loan balance reaches 80% of your home’s original value. This is the most common way to eliminate PMI.
✅ What to do:
- Keep track of your loan balance and home value.
- Once you’ve paid down enough, contact your lender to request PMI cancellation.
- You may need to get a home appraisal (at your expense) to verify the value.
2. Automatic Termination at 78% LTV
Even if you don’t request it, your lender is legally required to automatically remove PMI once your loan-to-value (LTV) ratio hits 78%, based on your original purchase price—assuming you’re current on your payments. Make sure your payments are on time so you qualify for automatic termination as soon as you’re eligible.
3. Home Value Increase / New Appraisal
If your property has significantly appreciated—due to market growth or home improvements—you may be able to remove PMI sooner than expected.
📋 Steps to take:
- Contact your lender to ask about PMI cancellation based on current home value.
- Schedule a professional appraisal to prove your home’s value has increased.
- If your new LTV is 80% or lower, PMI may be dropped.
4. Refinance Your Mortgage
Refinancing into a new loan can eliminate PMI if your new LTV is 80% or less. This option may also help you secure a better interest rate, depending on market conditions.
💡 Keep in mind:
- Refinancing comes with closing costs.
- You’ll need to qualify based on income, credit, and equity.
5. FHA Loans and MIP
If you have an FHA loan, you’re paying a different type of insurance called Mortgage Insurance Premium (MIP). Removing it usually requires refinancing into a conventional loan—unless you put down 10% or more and meet the loan age requirements.
Getting rid of PMI is a smart financial move that can free up money each month and help you build long-term wealth. Whether you’re close to 20% equity, seeing a rise in your home’s value, or thinking about refinancing, we’re here to help you explore your options.
Have questions? Contact our team today—we’ll guide you through your best path to removing PMI and saving more every month.
Por: jon iacono