PMI removal does not require a refinance. There should be a section in your loan agreement about the criteria necessary to get rid of it. Contacting your lender should also get you that information. In any case, there will be a scheduled date where PMI falls off automatically.
Remember: You might be able to eliminate PMI when your home value rises or when you refinance the mortgage with at least 20 percent equity. But the onus is on you to request it.
You can't remove PMI until after 24 months of payments, even if your equity increases significantly or you pay down the loan. Surely they told you that on the phone. If you have the capital, do a large lump sum payment to get to the 78% (it doesn't stop off at 80%LTv) and do a recast to lower your monthly payments.
If you've paid the principal balance below 80% of the home's original value, PMI can typically be removed. This process involves getting a new appraisal to determine the home's current value and ensuring it meets the lender's requirements under the Homeowners Protection Act.
You can remove PMI, or private mortgage insurance, from your mortgage after you have established enough equity in your home. You will need at least 20% in equity. At that point, you can request to have it removed or wait for it to automatically drop off when you have 22% in equity.
The Bottom Line: Getting Rid Of PMI Can Save You Money
As you build equity in your home, you may be able to cancel your PMI so you can save money each month. If you have a conventional loan and own 20% equity in your home, contact your lender to see if they can cancel your mortgage insurance.
Improvements are most likely to be considered substantial if they cost or add value in an amount equal to the balance you have left to pay down on your loan to reach 80% of your property's Original Value.
“After sufficient equity has built up on your property, refinancing from an FHA or conventional loan to a new conventional loan would eliminate MIP or PMI payments. This is possible as long as your LTV ratio is at 80% or less.”
When PMI is canceled, the lender has 45 days to refund applicable premiums. That said, do you get PMI back when you sell your house? It's a reasonable question considering the new borrower is on the hook for mortgage insurance moving forward. Unfortunately for you, the seller, the premiums you paid won't be refunded.
Pay down your mortgage sooner to remove PMI
For example, you could make one extra mortgage payment per year. Multiply your original home purchase price by 0.80 to determine the amount your mortgage balance needs to be to qualify for PMI cancellation.
Determining equity is simple. Take your home's value, and then subtract all amounts that are owed on that property. The difference is the amount of equity you have.
Yes, a lender can refuse to remove PMI. For instance, if your property does not appraise as expected or you do not satisfy a requirement, a lender can reject your request. However, if you meet the requirements, you can request the removal of PMI.
The Bottom Line. PMI is expensive. Unless you think you can get 20% equity in the home within a couple of years, it probably makes sense to wait until you can make a larger down payment or consider a less expensive home, which will make a 20% down payment more affordable.
The mortgage insurance rate you receive will be expressed as a percentage. It may depend on factors such as your down payment and credit score. But typically it's around 0.2% to 2% of the loan amount per year. Credit Karma's PMI calculator will provide an estimate for you.
Besides getting a lower rate, refinancing might also let you get rid of PMI if the new loan balance is less than 80% of the home's value. But refinancing will require paying closing costs, which can include myriad fees. You'll want to make sure refinancing won't cost you more than you'll save.
So, you'll need to get an appraisal to say goodbye to PMI early based on your home's current value (more on that later).
If the cost to repair the home is 49% or more of its value without the land, the home is considered Substantially Damaged and cannot be repaired without bringing it into compliance with the current floodplain codes (e.g. elevating or replacing it).
There are three cancellation situations: automatic, by request, or final termination. In all cases, the property's “original value” refers to the appraised value of the home, at the time of the current loan origination.
The 50% Rule is a regulation of the National Flood Insurance Program (NFIP) that prohibits improvements to a structure exceeding 50% of its market value unless the entire structure is brought into full compliance with current flood regulations.
PMI is not deductible like interest, so it generally makes sense to get rid of it. It shouldn't change your property taxes significantly, just the usual annual update.
Ask to cancel your PMI: If your loan has met certain conditions and your loan to original value (LTOV) ratio falls below 80%, you may submit a written request to have your mortgage servicer cancel your PMI. For more information about canceling your PMI, contact your mortgage servicer.
Legislation making PMI tax deductible was passed in 2006. It applied the deduction to policies issued in the 2007 tax year going forward. The measure has been periodically renewed, but expired after the 2021 tax year. Currently, PMI is not deductible for the 2022 or later tax years.