In a Nutshell: There are several ways to eliminate private mortgage insurance associated with your house loan. Getting rid of PMI can help you save money on your monthly mortgage payment. Editorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect.
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Private mortgage insurance, or PMI, can feel like an unwelcome guest in your monthly mortgage payments. It’s an extra fee that adds to your financial burden, and you’re probably eager to see it go But how do you get rid of PMI? One way is to get an appraisal
What is PMI and how does it work?
PMI is an insurance policy that protects the lender in case you default on your mortgage. It’s typically required if you make a down payment of less than 20% of the home’s purchase price. PMI premiums can add hundreds of dollars to your monthly mortgage payment, so it’s understandable that you’d want to get rid of it as soon as possible.
When can you get rid of PMI?
There are two main ways to get rid of PMI:
- Reach the 20% equity threshold: This means that you’ve paid down your mortgage balance to 80% of the home’s original purchase price. For example, if you bought a home for $200,000, you would need to pay down your mortgage to $160,000 to reach the 20% equity threshold.
- Get an appraisal: Even if you haven’t reached the 20% equity threshold, you may be able to get rid of PMI by getting an appraisal that shows your home’s value has increased. If the appraisal shows that your home is now worth more than 80% of the original purchase price, your lender may allow you to cancel your PMI.
Should you get an appraisal to remove PMI?
Several factors determine whether or not you should get an appraisal to remove PMI. These factors include:
- The current value of your home: If your home’s value has increased significantly since you bought it, you’re more likely to be able to get rid of PMI with an appraisal.
- The cost of the appraisal: Appraisals can cost a few hundred dollars, so you’ll need to weigh the cost against the potential savings you could get by getting rid of PMI.
- Your loan terms: Some loan terms may allow you to automatically cancel PMI once you reach a certain equity threshold, even if you haven’t reached the 20% threshold.
How to get an appraisal to remove PMI
If you decide to get an appraisal to remove PMI, here are the steps you need to take:
- Contact your lender. Let your lender know that you’re interested in getting an appraisal to remove PMI. They will be able to tell you the specific requirements for getting rid of PMI and provide you with a list of approved appraisers.
- Choose an appraiser. Select an appraiser from your lender’s list and schedule an appointment.
- Get the appraisal. The appraiser will visit your home and assess its value. They will then prepare a report that you can submit to your lender.
- Submit the appraisal to your lender. Once you have the appraisal report, submit it to your lender. They will review the report and determine if you’re eligible to cancel your PMI.
Tips for getting a successful appraisal
Here are a few tips to help you get a successful appraisal:
- Make sure your home is clean and tidy. The appraiser will be looking at the overall condition of your home, so it’s important to make a good first impression.
- Do some research on your home’s value. You can use online tools or talk to a real estate agent to get an idea of what your home is worth.
- Be prepared to answer the appraiser’s questions. The appraiser will likely ask you about your home’s history, any renovations you’ve made, and the neighborhood.
The bottom line
Getting rid of PMI can save you a significant amount of money on your monthly mortgage payments. If you think you might be eligible to remove PMI, it’s worth getting an appraisal to see if it’s the right option for you.
Additional Resources
- Fannie Mae: Removing PMI
- Freddie Mac: Removing PMI
- Consumer Financial Protection Bureau: Private Mortgage Insurance
Frequently Asked Questions
- How much does an appraisal cost?
The cost of an appraisal can vary depending on the location and the size of your home. However, you can expect to pay between $300 and $500.
- How long does it take to get an appraisal?
It typically takes about two weeks to get an appraisal. However, the timeframe can vary depending on the appraiser’s schedule and the complexity of the appraisal.
- What happens if my appraisal doesn’t come in high enough?
If your appraisal doesn’t come in high enough, you may not be able to get rid of PMI. However, you can try to appeal the appraisal or wait a few months and get a new appraisal.
- Can I get rid of PMI without an appraisal?
In some cases, you may be able to get rid of PMI without an appraisal. For example, some lenders offer a “PMI cancellation program” that allows you to cancel PMI once you’ve reached a certain equity threshold. However, not all lenders offer this program, so you’ll need to check with your lender to see if it’s an option.
Refinance to get rid of PMI
Mortgage refinancing can provide a lot of benefits, including potentially eliminating PMI. When you refinance a home loan, the new lender will typically require an appraisal. It is possible to avoid having PMI added to your refinance loan if the loan amount is 80% or less of the newly appraised value.
Keep in mind that refinancing will trigger a host of fees and closing costs. Refinancing typically makes the most sense if interest rates have fallen since you took out the original mortgage.
Can PMI be removed early?
PMI can feel like a penalty if you don’t have a 20% down payment, but there are several ways you can get it removed. Under the federal Homeowners Protection Act, you can get rid of PMI by requesting cancellation or by waiting for automatic termination.
Unless you’ve already gotten PMI removed, loan servicers must end PMI when you’re halfway through paying your loan. For example, at the 15th year of a 30-year loan.
Here are four ways to get rid of PMI.