How to get rid of Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is typically required when the homebuyer makes a down payment that is less than 20% of the property's value. PMI protects the lender in case the borrower fails to make payments. However, once the homeowner has built up enough equity in their home, they may be able to remove PMI. Here are some steps to remove PMI:
Review your mortgage documents: Check your mortgage paperwork to see what the requirements are to remove PMI. Typically, you will be required to have paid a minimum number of mortgage payments and have reached a certain percentage of equity in the home.
Obtain a home appraisal: The lender may require an appraisal to determine the value of your home. If the value of your home has increased, this may help you reach the equity threshold you need to remove PMI.
Make additional payments: Making additional payments on your mortgage can help you reach the equity threshold more quickly. Additionally, if your home has increased in value, making extra payments can help you pay off your mortgage faster and save on interest charges.
Contact your lender: Once you believe you have met the requirements to remove PMI, contact your lender and ask for PMI to be removed. They may require documentation, such as an appraisal or proof of additional payments. If approved, PMI can be removed from your monthly mortgage payment.
PMI is different from homeowner's insurance, which protects the borrower's property in case of damage or loss. PMI only protects the lender and does not provide any coverage for the borrower.
It's important for borrowers to understand the costs of PMI and factor it into their budget when considering a mortgage. However, PMI should not be considered a barrier to homeownership, as there are many low down payment mortgage options available that can help make homeownership a more realistic option for many people.