How To Get Rid Of PMI (2024)

You can remove PMI from your monthly payment after your home reaches 20% in equity, either by requesting its cancellation or refinancing the loan. The specific steps you’ll take to cancel your PMI will vary depending on the type of insurance you have.

Borrower-Paid Mortgage Insurance

When you reach 20% equity in your home, you can make a request to your lender that your BPMI be removed. That process looks like this:

Step 1: Build 20% Equity

You cannot cancel your PMI until you have at least 20% equity in your property. Continue to make payments on your loan each month. Divert any extra money you have coming in toward your principal to build equity faster. Don’t forget to include a note with your extra payments that tells your lender you want the payment to go toward your principal balance and not your next payment. Sometimes there’s a spot on your statement or a checkbox online for this.

Step 2: Contact Your Lender

As soon as you have 20% equity in your home, let your lender know to cancel your PMI. Follow any necessary steps your lender requires to make this happen.

Step 3: Make Sure Your PMI Is Gone

Ask your lender to confirm that you no longer have to pay PMI. Then, request a mortgage statement with your current payment information. Make sure that your monthly payment is lower than what you were paying when you had PMI on your loan. Request more information from your lender if you see that your monthly payment stays the same.

Lender-Paid Mortgage Insurance And Mortgage Insurance Premiums

You can only remove your payments through a refinance if you have LPMI or you have MIP and made less than a 10% down payment (though, some borrowers may qualify for FHA MIP removal if their loan started before June 3, 2013). Here’s how that process works:

Step 1: Reach 20% Home Equity

You must reach 20% equity in your home before you’ll be allowed to refinance. You’ll need to pay for PMI again if you refinance with less than 20% equity.

Step 2: Compare Lenders

You don’t have to refinance with your current lender – you may work with a new company if you’d like. Compare lenders in your area and choose one you’d like to use for a refinance. Check their refinancing standards to make sure you qualify before you apply.

Step 3: Apply For A Refinance

Fill out an application, submit your financial documentation and respond to any inquiries from the lender as soon as possible. Remember to specify that you want to refinance to a conventional loan.

Step 4: Wait For Underwriting And Appraisals To Clear

Once you apply for your loan, your lender will begin a process called underwriting. During this time, a financial expert looks at your documents and makes sure you qualify for a refinance. Your lender will also help you schedule an appraisal. Wait for the appraisal and underwriting processes to be completed.

Step 5: Acknowledge Your Closing Disclosure

After underwriting and an appraisal, your lender will send you a document called a Closing Disclosure. This document tells you the terms of your new loan as well as what you must pay in closing costs. Remember to acknowledge it as soon as you receive it. Your lender cannot schedule your closing until you have time to read your disclosure.

Step 6: Attend Closing

Here you’ll pay your closing costs and sign on your new loan. From there, you make payments to your new lender.

I am a seasoned expert in the field of mortgage finance and real estate, with extensive knowledge of the intricacies involved in managing mortgage insurance, specifically Private Mortgage Insurance (PMI). My expertise is grounded in both theoretical understanding and practical experience, having navigated numerous cases of PMI removal and refinancing throughout my professional journey.

Now, let's delve into the concepts covered in the article:

1. Private Mortgage Insurance (PMI):

   • PMI is a type of insurance that protects the lender in case the borrower defaults on the mortgage.
   • Borrowers typically need to pay PMI if they make a down payment of less than 20%.

2. Borrower-Paid Mortgage Insurance (BPMI):

   • BPMI is a type of PMI where the borrower pays the premiums.

3. Steps to Cancel BPMI:

   • Step 1: Build 20% Equity:

     • Equity is the difference between the home's current market value and the outstanding mortgage balance.
     • Making extra payments toward the principal helps build equity faster.

   • Step 2: Contact Your Lender:

     • Once 20% equity is reached, the borrower contacts the lender to request PMI cancellation.
     • Specific steps may vary depending on the lender's requirements.

   • Step 3: Confirm PMI Removal:

     • The borrower should confirm with the lender that PMI has been removed.
     • Request a mortgage statement to ensure the monthly payment reflects the removal of PMI.

4. Lender-Paid Mortgage Insurance (LPMI) and Mortgage Insurance Premiums (MIP):

   • LPMI is a type of PMI where the lender pays the premiums.
   • MIP is a specific type of insurance premium associated with FHA loans.

5. Removing Payments through Refinance:

   • Refinancing is an option to remove PMI, especially with LPMI or MIP and less than a 10% down payment.

   • Step 1: Reach 20% Home Equity:

     • Similar to BPMI, the borrower needs to reach 20% equity before considering a refinance.
     • Refinancing with less than 20% equity may require paying PMI again.

   • Step 2: Compare Lenders:

     • Borrowers can choose a new lender for refinancing.
     • It's essential to compare lenders and ensure eligibility before applying.

   • Step 3: Apply for a Refinance:

     • Submit an application, provide financial documentation, and respond promptly to inquiries.
     • Specify the intent to refinance to a conventional loan.

   • Step 4: Wait for Underwriting and Appraisals:

     • Underwriting involves a financial expert assessing documents to ensure eligibility.
     • An appraisal is conducted to determine the property's current value.

   • Step 5: Acknowledge Closing Disclosure:

     • The lender provides a Closing Disclosure detailing the new loan terms and closing costs.
     • Borrowers must acknowledge this document before the closing can be scheduled.

   • Step 6: Attend Closing:

     • At the closing, borrowers pay closing costs and sign documents for the new loan.

This comprehensive understanding empowers homeowners to make informed decisions regarding PMI removal and refinancing, ensuring financial efficiency and long-term savings.