How to get rid of private mortgage insurance (PMI)
The private mortgage insurance (PMI) is a monthly payment that you have to do when you bought a house with a down payment of less than 20%. This is an insurance policy that protects lenders in case that you default on your home loan.
Since PMI is expensive, it is important to get rid of it. But, how can you do it? Depending on your specific case, there are some ways in which you can do it. But before doing anything, find out if you are eligible, or nearly eligible for an automatic PMI cancellation.
PMI automatic cancellation
Don´t worry: you do not have to be a financial expert to understand how PMI automatic cancellation works. To get rid of PMI you must have at least 20% equity in the house. It means that you have paid down the mortgage balance to 80% of the home´s original price. Actually when the balance drops to 78%, the lender has to eliminate PMI. If you are close to be eligible for this automatic cancellation, just wait: this is your right choice. Easy, right? There are other ways to get rid of PMI in case that you have not made enough payments for the automatic cancellation.
These are some options:
Get a new appraisal
If the value of your home has increased since the time you bought the house, you can ask the lender to eliminate the PMI. What you need to do is an appraisal in order to evaluate the new home price. Keep in mind that an appraisal will cost $300 to $450 that you will have to pay. The lender has the last word to decide whether eliminate the PMI or not.
Doing home improvements such as adding a pool or a room to your home can increase the house´s market value. In this case, you can ask the lender to recalculate your loan with the new house´s value and get rid of the PMI.
Refinancing is always a choice, but first you need to do the math. Verify if the money you save ending the PMI payments earlier, is greater than the costs of refinancing. Do you need help to make a decision? Contact Yourcasa here or call us at 1-866-200-5250 and let us help you.