How to Get Rid of PMI (Private Mortgage Insurance)
How to get rid of Private Mortgage Insurance (PMI)
Private Mortgage Insurance is required in most cases when getting a loan if you do not put more than 20% down on a home loan (i.e. have a 20% equity position in a property).
It is an insurance premium that is provided by a 3rd party for the bank which covers the loss up to that 20%. This insurance premium is what motivates a bank to lend and at the low rates to a borrower with less than 20% down.
In order to get rid of PMI, either the house needs to have appreciated to have a 20% equity position or the borrower needs to have paid down a portion of the principal balance to give the house that 20%. Appreciation can come from just regular market gains or from improvements to the property that a home owner has made.
There are three ways to remove PMI. You can either provide a new appraisal to the bank to show the new value, wait until you have paid down 78% from the original appraised value. Or refinance the property which really only makes sense if interest rates have not increased.
Bank’s don’t really want to remove this premium. So, you as a homeowner needs to nudge the bank in order to get them to do it.
At 78% of that original appraised value, a bank should automatically roll off the Mortgage Insurance Premium. Should. You will want to call them to verify if this is the case.
If you think the market has appreciated to give you that 20%, then the first thing you should do is call your Realtor to verify the market comps. Your Realtor can do this at no cost and this way you will have actual comps to provide to an appraiser.
Once you have figured out that you believe you have enough equity, then you will want to call your bank and talk with them about the process of hiring an appraiser. Do they have a certain list of appraisers that they would like used? Are there any specific stipulations or requirements in regards to the appraiser? Or can you hire any independent appraiser and submit their report?
Most programs will not allow a homeowner to roll off PMI in the first 6 months to a year.
Recap of the steps to removing your Private Mortgage Insurance
Step 1. Call your Real Estate Agent to verify your property value
Step 2: Call your mortgage banker to see if interest rates have improved and if a refinance might be better than just removing the PMI
Step 3: Call your bank and verify the process of getting new appraisal
Step 4: Get a new appraisal done on the property
Step 5: Submit new appraisal to your bank
Other Articles That You May Find Interesting
- What is PMI - Private Mortgage Insurance?
- What Should A First Time Home Buyer Know?
- How Much Does it Cost to Sell a House?
- How Long Does it Take to Buy a House - The Buyer Timeline
- How Much do Real Estate Agents Charge?