Is It Time to Stop Paying PMI?
Private Mortgage Insurance (PMI) allows buyers to purchase a home with less than a 20% down payment. But if you’re paying PMI, you may be wondering: Is it time to stop paying this monthly expense and start putting that money back in your pocket?
Each month, your mortgage payment covers not just the loan itself but also real estate taxes and various types of insurance—homeowners, hazard, flood, and possibly PMI. If you bought your home with a conventional loan and put down less than 20%, you’re likely paying PMI. This insurance protects the lender if you stop making payments, but many homeowners continue to pay it long after it’s no longer necessary, potentially wasting thousands of dollars in premiums.
The Good News: You Can Cancel PMI
Once you’ve gained 20% equity in your home—whether through appreciation, home improvements, or paying down your mortgage—you can request that your lender cancel PMI. This is possible with a simple written request and proof of your home’s 20% equity. Most lenders will have a form for you to fill out, and the necessary proof is often a state-certified appraisal.
How to Cancel PMI
Thanks to the Homeowners Protection Act, lenders are required to inform homeowners about their PMI payments and the process for canceling the insurance. However, you don’t need to wait for the lender’s notification. If you have at least 20% equity, you can usually cancel PMI right away.
A state-certified appraisal is typically required to prove your equity, and we can help. At Top Corner Appraisal, we specialize in providing accurate appraisals that support your request to eliminate unnecessary PMI costs.
When Is PMI Required?
PMI is generally required if you put down less than 20% on a single-family home purchase. If you put down 20% or more, you likely have enough equity to protect the lender, and PMI isn’t required. Over the years, PMI has become more common due to the popularity of lower down payments, helping millions of Americans purchase homes they otherwise might not have been able to afford.
PMI Doesn’t Protect Homeowners
Remember, PMI doesn’t protect you—the homeowner—against loss. It only protects the lender. You’ll likely never deal directly with the mortgage insurance company, as all communication and decisions about PMI are handled by the lender or loan servicer.
It’s important to stay in touch with your loan servicer, which may not be the same as the original lender, to understand the process and requirements for canceling PMI. Your servicer will determine if you’ve accumulated enough equity to drop the insurance, considering factors like your payment history.
Steps to Cancel PMI
Check Your Equity: If your home has reached at least 20% equity, you may be eligible to cancel PMI. Some lenders may require 25%, so check your loan documents to understand the exact requirements.
Contact Your Loan Servicer: Reach out to the company where you send your mortgage payments to start the process. They will explain the specific steps and requirements for cancellation.
Request an Appraisal: Your servicer will typically require an appraisal to confirm your equity. This is where Top Corner Appraisal can assist, providing you with a precise and certified valuation of your home.
Submit the Necessary Documentation: Provide your servicer with the appraisal report and any other required documentation to support your PMI cancellation request.
Why You Should Act Now
Continually paying PMI, especially when it’s no longer required, drains your finances. PMI is an expense that once served its purpose—helping you get into your home—but now may be unnecessarily cutting into your budget. As a financial decision-maker, it’s in your best interest to eliminate unnecessary costs, and stopping PMI payments is an easy way to keep more money in your pocket.
At Top Corner Appraisal, we specialize in helping homeowners like you stop paying PMI by providing accurate, state-certified appraisals. Contact us today to learn more and get started on the path to eliminating PMI from your mortgage payments.