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What is PMI mortgage?
PMI is an abbreviation for Private Mortgage Insurance. This is special insurance that lenders force higher risk borrowers to pay to protect the interests of a bank in case of default. PMI is only applicable in very specific instances, most often when you are borrowing more than eight percent of your home’s fair market value.
How to get rid of PMI?
- Watch home values in your area. If your home has substantially increased in value, consider getting an appraisal done of your home to back up your assertion of the increased value. With that data, you can ask your lender to remove PMI.
- Watch the numbers – if you know you now have at least twenty percent invested in your home because of extra payments towards your principle, call your lender. If they see the numbers as well, they will appraise the home again and you’ll most likely be out from under PMI.
How to do away with PMI?
Request the cancellation of PMI in writing when your equity has increased to greater than 20 percent of the home's current value (in which case you'll need an appraisal to verify), or when the loan has been paid down to 80 percent of the original loan amount.
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