How To Get PMI Removed From Your Home Loan
If you’re getting a home loan, the lender may require you to pay for private mortgage insurance,or PMI. PMI is typically required by lenders on mortgages in which the borrower is making a down payment of less than 20%. It is designed to protect the lender in case the borrower defaults. On a loan of $200,000, PMI may cost you $50-$200 per month, depending on the size of the down payment and the length of the loan.
Once you’ve made enough payments to boost your equity to 20% of the original purchase price, you can ask your lender to cancel your PMI. By law, the lender must cancel PMI at this point as long as you have a historyof on-time payments, you can establish that the property value has not declined and there is no subordinate lien-such as a home equity loan on the property. If you can’t get PMI removed at the 20% level, it gets easier once you reach 22% equity (based upon the original purchase price). At that point, the lender must automatically cancel PMI as long as you are current on your payments. (23% if you are considered high risk)