How to Finally Get Rid of PMI Insurance on Your Mortgage


If you took out a conventional mortgage, your monthly payment will consist of more than just principal and interest components. You’ll also be stuck paying for PMI, or Private Mortgage Insurance, if you purchased your home with a down payment less than 20%.

While paying PMI can be somewhat annoying – especially considering all the other costs that come with a home purchase – it’s understandable why PMI is mandatory if you’re putting less than 20% down on a home. This type of insurance protects the lender if you end up defaulting on your mortgage.

The less money you are able to put towards a home purchase, the more money your lender is going to have to front to help you make that big purchase, putting them at increased risk. Should you ever fail to pay your mortgage for whatever reason, your lender will be covered.

The good news is that you don’t have to be stuck paying premiums on PMI forever.

How and When is PMI Eliminated?

Your PMI premium can be removed once you have a minimum of 20% equity in the home, which means you will have to owe less than 80% of the home’s original appraised value before PMI is canceled. Once you’ve reached that number, you can request to have PMI eliminated, but you will have to meet certain conditions first.

For starters, your request must be made in writing, and your payment history needs to be in good standing. Your lender might want to verify whether or not there are any outstanding liens on your home and will want to have the property appraised to ensure it hasn’t decreased in value.

PMI can also be canceled automatically if the amount you owe on your mortgage reaches 78%. As per the Homeowners Protection Act, your mortgage servicer is required to eliminate your PMI when your outstanding mortgage balance reaches this point. There’s no need for a written request; however, you need to be up to date with your mortgage payments before PMI is dropped.

With the right steps and due diligence, you can eliminate PMI payments as part of your mortgage payments sooner rather than later. Here’s how.

Make Bigger Monthly Payments


The most obvious way to reach that 80% or 78% mark is to put more money towards your mortgage. The faster you pay it down, the faster you’ll reach the point where PMI won’t apply any longer. Even an extra $50 or $100 a month extra can make a big difference in paying down your principal. And depending on your particular mortgage arrangement, you may also be able to make lump sum payments once per year without penalty.

Not only will making bigger monthly mortgage payments help you lower your outstanding balance to 78% and thereby help you effectively eliminate that extra PMI payment, you can also reduce your overall interest payment. This can translate into significant savings over the course of your mortgage.

Get a New Appraisal

Depending on where you live, your home may have increased in value since you first bought it. If it has increased in value high enough, your lender may be more willing to take the PMI off your mortgage. Consider having an appraisal done on your home to see what its present value is and if it’s increased in value. If it has increased by a significant amount to the point that you reach that 80%, your lender may agree to drop the PMI.

Refinance Your Home Loan


If your home has appreciated in value high enough, you might be able to refinance your home. When you refinance, you basically pay off the first home loan, after which a second loan is created. You’re essentially replacing your present mortgage with a new one. If you’re able to get a mortgage that accounts for less than 80% of the value of your home, you may be able to ditch that pesky PMI payment.

Remodel Your Home

Aside from appreciation over time, there are other ways to increase the value of your home. Remodeling your property is a great way to boost your home’s value. Certain projects can bring in a high ROI, while others can end up costing you a lot more than you will ever get back, which is why it’s important to carefully consider the types of remodeling projects to take on.

If your remodeling job boosts your home’s value high enough, you might be able to reach that 80% threshold and have the PMI officially eliminated. An appraisal will need to be conducted to verify how much the home’s value has actually increased as a result of the improvements made.

The Bottom Line

The best way to avoid having to pay PMI is to put at least 20% down on a home purchase. However, that can be a tall order, especially in certain markets where home prices are through the roof. If you aren’t able to come with a 20% down payment, that doesn’t mean you’ll be stuck with PMI forever.

There are several ways to go about achieving a loan amount that’s less than 80% of the property’s value. All you need is a little due diligence and self-discipline with your finances in order to whittle down your outstanding balance to the point where PMI is no longer required.