Wondering how to cancel your PMI?
If you didn’t put down 20 percent in cash on your home, you’re probably paying private mortgage insurance, also known as PMI, and you’re wondering how to get rid of it.
Here’s what to do. Start by contacting your lender. Ask if the lender has specific steps that must be followed when canceling PMI. Typically, you’ll need to jump through several hoops before they let you drop it. You’ll need to have your home appraised to make sure you’ve reached the magic 20 percent in equity. Expect to pay anywhere from $300 on up for that appraisal.
If you’ve built up the necessary equity, you’ll need to send your lender a letter formally requesting that they drop PMI, and reduce your monthly payment.
A new law on the books requires lenders to automatically cancel your PMI once you’ve reached 22 percent equity based on your original home loan and sales price.
Lenders typically make the process of dropping PMI more cumbersome than it needs to be. Just be tenacious, and keep a copy of all correspondence. Sooner or later, your persistence will pay off, and you’ll be able to start using your PMI savings to pre-pay your mortgage, or invest for your retirement.