How to Save Thousands By Eliminating PMI

Private Mortgage Insurance (PMI) is something most mortgage loan programs require unless the borrower has more than 20% equity in a property, and it can cost home owners thousands of dollars per year. PMI insures the lender against default by the borrower, and it generally costs 1/2 – 1% of the loan amount per year. This is incorporated into the monthly mortgage payments. Essentially the bank is charging the borrower extra fees to insure themselves against extra risk.

There are ways to end PMI. You are not stuck with it for the life of your loan. With the significant home price increases over the past few years, you probably have the potential to eliminate PMI and save a lot of money. Here are 3 possible ways to end PMI:


1) Automatic cancellation: Once your loan balance is below 78% of the original purchase price, PMI will automatically be removed.

2) Midpoint cancellation: PMI will automatically end at the midpoint of your loan.

3) Requested cancellation: Here’s where everyone should be paying attention! If your loan to value ratio (loan amount divided by home value) is down to 80% or lower, you can request that the lender cancel PMI. In other words, if you can show that you have 20% equity in the home, you may qualify to have your lender cancel the PMI. If you think you are at this point, check with your lender on their policies and procedures for stopping PMI. The lender will typically hire an appraiser, at your cost, to prove the value of your property. If the appraisal shows the appropriate value, the lender will cancel your PMI. Feel free to reach out to us for a market analysis and equity evaluation prior to paying your lender for an appraisal.

Most home buyers probably haven’t given this much thought, but home prices have gone up 7-13% per year for the last 3 years in our area. So even if you made a very small down payment just a few years ago, there’s a strong chance you are exceeding the 20% equity position now.

For any of these options to work, you must be current on your payments. The lender will not cancel your PMI if you’ve had late payments or other issues that put your loan in a high-risk category.

Ask your lender what their policy is for terminating PMI, and make it a goal. Stop throwing that money away and put it to good use!

Comments are closed.


more from the blog

We donate 10% of all
commissions to a charity of our
client's choice


more about charity program
buy it sell it