Mortgage Insurers. Call the number on your monthly mortgage statement, long before you need it, she says. You can save money by acting to remove PMI sooner. A good payment history. The rule is no payments 30 days late in the past 12 months and no day late payments in the previous 24 months. Timely payments count when it comes to getting rid of PMI. Late payments can put you in a high-risk category, making it harder to cancel. No other liens.
Proof of value. Certain lenders accept a broker price opinion instead. Some lenders require borrowers to use certain appraisers. If interest rates have dropped since you took out the mortgage, then you might consider refinancing to save money.
But refinancing will require paying closing costs, which can include myriad fees. In this case, it might be worth paying for a new appraisal. Some lenders might be willing to accept a broker price opinion instead, which can be a substantially cheaper option than a professional appraisal. On the flip side, professional appraisals are highly regulated and provide an unbiased assessment. Who this affects: Borrowers who live in areas that are particularly red-hot might have seen their home values shoot up in the last couple years.
In fact, the value might have increased enough to bump you out of the PMI range. If you cross the 20 percent equity finish line in the process, then you can kick PMI to the curb.
Lenders have different rules for cancelling PMI, but they have to let you do so. This will enable you to accurately track your progress toward ending the PMI payment. If you feel your lender is not following the rules for eliminating PMI, you can report your complaint to the Consumer Financial Protection Bureau. Remember: You might be able to eliminate PMI under a few other circumstances, too, such as when your home value rises or when you refinance the mortgage with at least 20 percent equity.
While paying PMI each month — or as a lump sum each year — is no financial joyride, be careful not to make your finances worse by hustling to get rid of PMI.
Most financial experts agree that having some liquidity, in case of emergencies, is a smart financial move. You can drop it once you achieve a 20 percent equity cushion, which may only be a few years away depending on home price appreciation. But do not feel the need to use every last nickel of cash to make a down payment that avoids PMI, only to leave yourself with little in the way of financial flexibility afterwards.
How We Make Money. Jeff Ostrowski. Written by. Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in , he wrote about real estate and the economy for the Palm Beach Post and the South Florida …. Edited By Suzanne De Vita. Edited by. Suzanne De Vita. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters.
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Key Principles We value your trust. Bankrate Logo Insurance Disclosure. PMI is an insurance policy charged by mortgage lenders to protect themselves if you default on your home loan. For the most part, your PMI payments, which usually cost between 0. Lower your monthly costs While paying PMI can allow you to buy a home with a lower down payment, it also costs you money. To lower your costs further, make sure to shop around for refinance rates. Credible lets you easily compare real, prequalified rates from all of our partner lenders in the table below.
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