Private mortgage insurance (PMI) is exactly what it sounds like: a premium you pay each month for insuring your mortgage. Except you’re not insuring your mortgage for your benefit, but for the benefit of your lender.
PMI is the price you pay in order to protect your lender from the payments they would lose out on if you were to default on your mortgage loan.
PMI is not permanent. In fact, you will no longer be charged PMI once the loan-to-value in your home reaches 78%. This means that if you want to get rid of PMI on your mortgage, all you have to do is wait.
However, what if you want to stop paying PMI sooner? Fortunately, there are a few ways you can manage to do just that. Check out these tips to learn how to stop paying PMI on your mortgage loan:
- Request a cancellation. Your lender may cancel your PMI once you have a mortgage balance of 80% instead of the usual 78%. All you have to do is send a written cancellation request and have a good payment history. It may seem like a lot of work just for 2%, but canceling your PMI just a few months sooner could save you hundreds of dollars.
- Request an appraisal. If your home has increased in value since you bought it, you may already have built more equity than you realize, especially if you have improved certain key parts of your property, such as your kitchen or bathrooms. If your new appraisal shows that your loan-to-value ratio is 78% or less, your lender will cancel your PMI insurance.
By Melanie Henson –