PMI Removal

Private mortgage insurance (PMI) is a type of insurance that lenders require borrowers to purchase when they put down less than 20% of the purchase price of a home as a down payment. The purpose of PMI is to protect the lender in case the borrower defaults on the loan. PMI is usually paid by the borrower as a monthly premium, and it can range from 0.3% to 2% of the original loan amount annually.

To remove PMI; an appraisal is a very effective tool. If a home's value has increased or a borrower have made enough payments to reach 20% equity, it can be requested that the lender cancel the PMI. Then; proof of the increased value needs to be provided, such as an appraisal. Example: if a home is currently worth $250,000 and owner owns $200,000; then, the property is currently below the 80% loan to value ratio and PMI is no longer required.

If the home's value has increased significantly, an appraiser will help to assess the value. The borrower can then request that the PMI be cancel if the new appraisal shows that the borrower has at least 20% equity.